Report: HP Considered Spinning Off PC And Printing Business As Part of EMC Discussions

Hewlett-Packard considered a spin-off of its $56 billion PC and printing business as part of merger discussions with EMC, according to a CNBC video report.

CNBC reported that the discussions between HP and EMC, which included a potential HP PC and printing business spin-off, are no longer ongoing. The financial cable news network reported that the discussions broke down with regard to the price of the deal.

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HP and EMC would not comment on the reports of the potential merger discussions or whether HP had considered spinning off its PC and printing business.

The Wall Street Journal first reported that EMC, under pressure from an activist investor and facing the potential retirement of CEO Joe Tucci, had held merger and acquisition discussions with both HP and Dell.

The CEO for a large HP enterprise partner, who did not want to be identified, said if an HP EMC deal did come to fruition and HP spun off the PC and printing business it would not negatively impact his business.

"HP internally treats its enterprise business and its PC and printing businesses as two separate groups in the field," said the CEO. "If they did spin it off, it wouldn’t affect me. PCs and printers are not a big business for us."

The CEO, who oversees a large HP and EMC business, said he would welcome a deal given that it would result in more muscle under a single vendor partner. "It would be easier for us as an HP and an EMC partner," he said.

Another CEO for an HP enterprise partner, who did not want to be identified, said he sees a potential EMC HP deal as a big opportunity for the channel. "Where is change and transition, there is opportunity," he said. "Where there is chaos, there is lots of opportunity."

Several HP partners said they had heard that a potential HP-EMC deal would have included a spin-off of certain parts of the business.

NEXT: HP Enterprise Partners React

A top executive for a large national integrator, who did not want to be identified, said the EMC deal is "dead at this point" but would have included HP unloading certain business units. "EMC wanted too much for HP so it is no deal," said the executive. "Could it come back alive? Oh yes."

It wouldn't be the first time HP considered spinning off its Personal Systems Group. Three years ago, HP considered spinning off its PC and printing business under former CEO Leo Apotheker.

However, HP CEO Meg Whitman, who replaced Apotheker, conducted an internal review that reaffirmed HP’s commitment to the Printing and Personal Systems business.

"The HP board of directors is confident that PSG can drive profitable growth as part of the larger entity and accelerate solutions from other parts of HP's business," HP said in a statement three years ago.

Ironically, talk of a potential PC and printer group spin-off comes with strong performance by the PC business in the most recent quarter. HP's personal systems sales were up 12 percent to $8.64 billion in HP’s third fiscal quarter ended July 31 with a 4 percent operating margin.

HP’s printer business sales were down 4 percent in the third fiscal quarter to $5.59 billion with an 18.4 percent operating margin.

The reports of a potential deal between HP and EMC came after hedge fund Elliott Management bought a stake in EMC last July. It also comes with longtime EMC CEO Joe Tucci set to retire early next year.

EMC and its board of directors have yet to name a successor. The only word from EMC on Tucci's retirement is a 2012 proxy statement that says the company had entered into an "employment arrangement with Mr. Tucci to remain with the Company through at least February 2015."

KEVIN MCLAUGHLIN contributed to this story.

PUBLISHED SEPT. 22, 2014