Can HP Coach GE Through Its Break Up?

Sometimes, good things need to fall apart so better things can come together.

After struggling for a long time to reconcile the very different characteristics of its business, GE recently announced it would be unloading its healthcare business in what will be one of the biggest corporate breakups in recent years.

HP, which went through a similar, albeit smaller, breakup back in 2014, could give GE a few pointers. The company split into HPE, which focused on corporate customers, and HP Inc., which focused on generating revenue but not necessarily growth. While HPE has been doing well, HP Inc. has been struggling to recover from the split until fairly recently.

Analysts agree there are considerable similarities between the two splits.

“When you look at GE, its back was against the wall, the pressure has been building, very similar characteristics to HP,” said Daniel Ives, head of technology research at GBH Insights. “It’s hard to run two businesses that have such different characteristics, that was the frustration for investors. They made a smart decision when they broke that up, and giving investors the ability to invest in two separate vehicles depending on the characteristics they were looking for.”

The key for GE will be investing a lot of time and patience into communicating with and reassuring its investors, which HP struggled with in 2014.

“There was an exodus of talent and customers when they [HP] announced it,” said Glenn O’Donnell, a Forrester Research analyst who focuses on HPE. “Lots were contacting us and asking what does it mean to me and my investment in HP.”

Chances are, the split will take its toll on GE customers, employees, and investors for some time until we realize the actual ramifications of the move. In the meantime, GE can learn a lot by analyzing what went right, and wrong, for HP back in 2014 during its turbulent split.

 

Sources: Market Watch, GBH Insights, Forrester