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CEO to step down after major shakeup

Hewlett-Packard will spin off its test division in a major shakeup that will culminate with the retirement of Lewis Platt as CE0.

Hewlett-Packard said today that it will split off its test and measurement division into a separate company in a major reorganization that will culminate with the retirement of Lewis Platt as CEO.

The spin-off is largely aimed at reinvigorating the company by cutting it up into smaller units that can move more aggressively, according to the company. HP's business practices need to change so that the company will be "more agile in the marketplace," Platt said, not ruling out further reorganization.

HP's stock jumped after HP, sign of the hard times news of the move, which could help revitalize a company that has seemingly been staggering in the past year. Although HP remains one of the top five PC makers, its strongest growth in the past year has largely come in the consumer computer segment, which carries lower margins.

HP is planning an initial public stock offering for the test and measurement division in "September, October, somewhere in there," chief financial officer Bob Wayman said. He added that such a deal it would be the largest such offering in Silicon Valley's history because of the company's current revenue figures.

The division pulled in more than $7 billion in fiscal 1998. HP would sell 15 percent of the company's stock under the IPO.

Although HP will still own most of the test and measurement division, the companies will operate as autonomous entities. Each will have its own CEO and board. HP labs will be parceled between the companies.

The separate company will be headed up by Ned Barnholt, now the general manager and executive vice president of the test and measurement division. All of the hardware, software, and computer services division would stay within HP, which the firm is calling the "computing and imaging" company.

"The complexity and confusion of having all of these businesses under one roof outweighs the synergies of having all of these businesses under one roof," Platt said, stating that the change will bring "increased visibility, speed and agility" to both companies.

Platt and three HP board members formed a special committee last Saturday that will conduct a search for a new chief executive. Platt will continue as chairman and CEO through the reorganization but will step down from active management of the company after that.

In a conference call this morning, Platt said that he and HP have been contemplating finding a successor for a while and that he and the company have decided "that it makes a lot of sense to begin that transition and get them done at the same time."

"We will be looking for someone who's seasoned in our industry," he said. "We will be looking outside but also looking inside for candidates."

In addition to today's move, HP contemplated splitting off the imaging division, which develops printers, scanners and digital cameras, into a separate company. The overlap with the PC business, however, militated against this alternative.

Still, Platt and the other HP executives said to keep an eye out for further changes. For example, the company's Unix sales have been relatively stagnant. Several sources say HP is strongly looking into the market for Internet appliances, a growth market that has yet to make a fortune for anyone.

Finding a successor to run the computing and imaging department could be difficult. HP has a history of promoting from within. In the past year, however, two high ranking PC executives, Rick Belluzzo and Dick Watts, left the company. Belluzzo, who went on to take the CEO job at Silicon Graphics, was widely considered Platt's heir apparent until he left.

High-ranking executives just below Platt that could be in line for the position include Ann Livermore, who was recently put in charge of HP's corporate computing unit, Carolyn Ticknor, who runs the Laserjet division, and Duane Zitzner, who runs the consumer PC division.

The test and measurement division, meanwhile, has generally shown steady growth, but amounts for only a fraction of HP's overall revenue. The division represented $7.6 billion in revenue out of a total of $47.1 billion in the company's fiscal 1998.

HP's board of directors approved pursuing the realignment early this morning, the company said.