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Tuesday, March 2, 1999 Published at 17:27 GMT

Business: The Company File

Hewlett-Packard splits in two

Once known for calculators, HP now is a force on the home computer market

The Silicon Valley power house and computing pioneer Hewlett-Packard has announced that it will split its business into two independently-managed companies.

The corporate restructuring will divide the computer maker along product lines.

Hewlett-Packard's computer businesses will be in one company and testing, measuring and medical instruments in the other.

[ image: Hewlett Packard products generated revenues of $47.1bn during 1998]
Hewlett Packard products generated revenues of $47.1bn during 1998
"We are taking this action to sharpen the strategic focus of our businesses, improve their agility and increase their responsiveness to customers and partners," Hewlett-Packard president Lewis E. Platt said in a statement.

Analysts say that the company had been underperforming for some time. After the announcement, HP shares rose 7-1/8 to $73.

"The two new companies we're creating compete in fast-moving, highly competitive markets," Mr Platt said.

"This realignment positions each new company to deliver enhanced growth in revenue and earnings."

HP's measurement business will be managed by Edward Barnholt, currently the company's executive vice president and general manager of the measurement division.

A decision on who will lead the computing business has not yet been taken. Mr Platt said he would step down once the restructuring was complete, but would be a member of the committee looking for candidates to lead the new company.

Shares in the offing?

In 1998 the combined business of Hewlett-Packard had revenues of $47bn and employed 122,800 people. Chief financial officer Robert Wayman said the company did not expect significant layoffs as a result of the restructuring.

Hewlett-Packard shares are currently worth more than $66bn on the New York Stock Exchange.

Under the plan, HP stockholders will hold shares in both companies. However, the company is considering to issue some 15% of new shares in the measurement business, calling this the potentially largest initial public offering in the technology sector in Silicon Valley history.

The measurement division, part of HP's original business, last year accounted for $7.6bn in sales.

The company was founded in 1938 by two engineers, Bill Hewlett and David Packard. They set up a workshop in a garage in Palo Alto, California, manufacturing instruments to test sound equipment.

It is a leader in the manufacturing of computer printers and Unix servers and has made strong inroads in the market for home computers based on the Wintel standard - using Intel chips and Microsoft's Windows software.

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