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HP dives into task of splitting apart

Hewlett-Packard begins working on dividing its 122,400-person company in two, and is close to selecting a headhunting firm charged with finding a new CEO.

Hewlett-Packard has started working on the giant task of splitting its 122,400-person company into two parts, and is close to selecting a headhunting firm charged with finding a new CEO.

Spencer Stuart and Heidrick & Struggles International are the leading contenders to win Hewlett-Packard's executive recruitment contract, and a decision is expected by the end of the month, according to sources.

Current chief executive Lew Platt is heading the HP transition team, which also includes chief financial officer Bob Wayman and personnel from HP's real estate, human resources, and legal organizations, said spokesman Michael Fournell. But the transition team is much larger than just top executives, including hundreds of people at each of the more than 600 offices HP has around the world, and Wayman is key to the transition, since the first stage will be to split the companies on paper, the accounting-intensive task of listing all the assets and liabilities of each piece of the vast company.

Splitting the two companies' assets is an essential step before HP can spin off its test and measurement company. This virtual splitting of HP will be done by the fall; the actual physical separation will take 12 to 18 months to accomplish, Fournell said.

Platt will step down once the transition is complete. Although it is speculation, one individual whose name that has come up as a possible candidate is Rick Belluzzo, the Silicon Graphics CEO who was once the heir apparent to outgoing HP chief executive Lew Platt.

In an interesting twist, Hewlett-Packard is considering teaming the recruiting firms together to gain the greatest coverage possible in their CEO search, said sources. The reason is because executive search firms tend to avoid picking CEOs that they have previously placed to avoid conflicts, but by having another firm involved, a CEO is not off limits to the second firm.

Much of the job of dividing HP is relatively simple, since HP's business units already are separated, Fournell said. But departments--including legal, human resources, government lobbying, and corporate communications departments--will have to be split up one way or another.

HP announced in the beginning of March that it is splitting into two separate companies so that each can become faster-moving entities.

The computing and imaging company will retain the HP name, Fournell said. HP's test and measurement, components, chemical analysis, and its medical groups will become part of an as-yet-unnamed company. An initial public offering for the new measurement company will take place in September or October, he said.

Curiously, the relative sizes of the two new companies are different depending on how they're measured. Judged by fiscal 1998 revenue, the computer and imaging company brings in about $39 billion. That means computing and imaging was responsible for about 83 percent of the revenue.

Measured in terms of personnel, however, the split isn't as lopsided. The computing and imaging company is expected to get roughly 78,000 employees, or 64 percent, with about 45,000 going to the measurement organization.

Fifteen percent of the stock for the new company will become publicly traded during the IPO, Fournell said. The remaining 85 percent will stay in the hands of existing HP shareholders.

The transition team is beginning to tackle the details of the split. Among the questions they're wrangling with: Which company gets which patents? What happens to HP's 40,000-page Web site? Who gets what parts of HP's archives? What happens to the employees' stock option or profit-sharing plans? How to manage the split in each of the 120 countries in which HP has personnel?

And in the organizations that are being split, who decides which employees go where?

"That is up in the air. We are inventing these things as we go along," Fournell said. However, employees' wishes are being taken into account, he said.

Building a new executive team
Though the new measurement company is in its nascent stages, a skeleton of staffing is starting to appear.

As announced earlier, Ned Barnholt, currently in charge of HP's test and measurement organization, will be the new chief executive officer.

Robert Walker, who has been vice president in charge of HP's enterprise computing solutions organization, has been chosen as chief financial officer for the new company. Jean Halloran, an 18-year HP veteran, is vice president of human resources. And William Hahn has become vice president of strategic planning.

Naming the new measurement company is a task HP is leaving to an unnamed consulting firm, though HP did solicit suggestions from its own employees. Among the thousands of responses, many of them in jest: "IQ," the two letters alphabetically following "HP."

In addition, HP is working with headhunter firms to locate a new CEO for the computing and imaging company, Fournell said. HP is evaluating candidates both from inside and outside HP.

Platt and HP board members Sam Ginn, John Fery, and Richard Hackborn are on the search committee for the new CEO, with Ginn in charge.