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New HP Needs Some Old IBM

NEW YORK ( TheStreet) -- Hewlett Packard's (HPQ) future may hinge on IBM's (IBM - Get Report) past.

As new HP CEO Meg Whitman mulls how much she wants to transform the world's largest computer maker through mergers and spins, there's plenty of wisdom she can pick up from the deals made by outgoing IBM CEO Samuel J. Palmisano.
HP CEO Meg Whitman

Whitman's September hire as HP's CEO comes at a time when the company weighs deals that may transform the HP from personal computer businesses toward software and services. That could match the turnaround at IBM completed by Palmisano, who's set to step down as CEO and be replaced by sales head Virginia M. Rometty at the end of the year -- Palmisano will continue as IBM's chairman.

HP's Whitman could pursue a strategy of acquisitions and divestitures in the mold of IBM's multi-decade move to higher profit margin businesses, which under Palmisano's leadership, included a sale of its own PC business, an acquisition of PriceWaterhouseCoopers' consulting arm and a handful of other deals that established Big Blue as a software and technological services giant.

HP has already started. It purchased a controlling stake in British software giant Autonomy for $10.3 billion earlier this month and is now deciding whether to continue former CEO Leo Apotheker's plans of tipping the balance of sales from PC's to services and software businesses by spinning its computers division.

After Apotheker's plan was approved by the company board and announced in August, he was then fired in September after just eleven months as HP's head and replaced by Whitman, a former Ebay (EBAY) CEO. Whitman has said that by the end of October, the company and its board will decide once and for all if it will spin its $40 billion computers business.

In an earlier article, TheStreet concluded that a PC spin and software transformation would require Whitman to cut a flurry of deals . Whitman's separately said in October that the company won't be in the deals market anytime soon.

An HP spokesperson said in an email to TheStreet, "Our approach to M&A has not changed. Across HP's portfolio, we will continue to pursue growth through organic innovation, we'll continue to partner, and we'll continue to evaluate M&A opportunities that make strategic, operational and financial sense."
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