Though they can be messy at first, tech spinoffs and breakups often end up serving investors well, as the post-breakup companies prove more nimble, agile and focused than the parent companies that preceded them.
Motorola Solutions' (MSI) - Get Motorola Solutions, Inc. (MOS) Report performance since Motorola's early-2011 breakup is one good example. And there are signsPayPal (PYPL) - Get PayPal Holdings Inc Reportis better positioning itself to go after the digital payments opportunities in front of it after splitting from eBay last year.
Though it's too early to call HP Enterprise (HPE) - Get Hewlett Packard Enterprise Co. (HPE) Report a big post-breakup success story, the company does look like it's in better shape than it was when the old HP split last fall. HPE delivered positive annual sales growth for the first time in five years during its April quarter -- last year's $3 billion purchase of Wi-Fi equipment vendor Aruba Networks helped, but so did stronger-than-expected server, storage and organic networking growth.
HPE has also announced plans -- much-applauded by investors -- to spin off its struggling Enterprise Services unit and merge it with Computer Sciences (CSC) . And in a deal that's particularly noteworthy given fears about the impact of cloud adoption on the company's hardware sales, HPE has unveiled an agreement with cloud storage giant Dropbox to act as Dropbox's server/storage provider as the company migrates from Amazon Web Services (AWS).
HPE's management restructuring, announced on Monday in a memo from CEO Meg Whitman, provides fresh reasons to think the company is on better footing to deal with an enterprise IT landscape in which cloud services adoption has begun wreaking havoc. Perhaps the biggest change: The HP Labs long-term R&D unit is being moved into the company's Enterprise Group, which is responsible for IT hardware and related services.
CTO and HP Labs chief Martin Fink will be leaving as part of the shakeup. However, as Whitman points out, more closely aligning HP Labs with HPE's product development teams should help speed the pace at which new technologies get commercialized. Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report has been trying to do something similar with its R&D labs.
Technologies being developed by HP Labs include The Machine, a next-gen computing architecture that does away with DRAM and storage drives in favor of a "universal memory" pool.
Other changes announced in the memo also aim to create a more focused and faster-moving IT giant. All sales teams are being moved into "a single global sales organization" within the Enterprise Group; HPE's product marketing, e-commerce and customer advocacy teams are being moved into a common marketing organization; and the company's IT and cybersecurity teams will now be overseen by COO Chris Hsu. Chief customer officer John Hinshaw, who was responsible for some of HPE's major accounts and strategic alliances, will join Fink in leaving.
HPE still faces some big challenges. Adoption of AWS and other cloud infrastructure platforms is taking a heavy toll on the enterprise server and storage markets, and that's not going to change anytime soon. And HPE's software business, hurt by both cloud adoption and share loss, remains in bad shape, with total revenue dropping 13% annually in the April quarter.
Nonetheless, the company's post-breakup actions suggest it has a management team with a good understanding of the challenges in front of it, and a willingness to make big moves to address them.
In trading on Tuesday, shares of HPE were up 1.2% to $17.41.