Hewlett-Packard Details 2-Way Split

LOS ANGELES -- Hewlett-Packard, the pioneering technology company held for decades as the standard for success in California's Silicon Valley, has revealed the details of a deal to split into two companies as it comes to grips with faltering momentum in the computer business.

The company said Tuesday that it will retain its computers, printers and software businesses, while spinning off its divisions that make medical products and measurement devices - such as equipment to test semiconductors and communications devices.

The spinoff breaks away the part of the company that was the starting point for the company's two legendary founders - Bill Hewlett and David Packard - operating out of a garage workshop. Those businesses now account for $7.6 billion of HP's $47.1 billion in 1998 sales.

The step comes as perhaps belated recognition that Hewlett-Packard was losing focus over its broad base of high-technology business, much the same way as such other titans as IBM and AT&T.

By breaking the company in two, HP intends to allow management to focus its efforts on the cutthroat but much faster-growing computer business.

"It's all about focus and agility," said Chief Executive Lew Platt. "When you look at successful conglomerates, you don't find them in this industry, where there's such a strong emphasis on agility and speed."

Platt, 57, said he would step down by the middle of next year after what is expected to be the largest Silicon Valley initial offering gives 15 percent of the as-yet-unnamed new company to the public and the rest is distributed to HP shareholders.

While HP is the still the world's fourth-largest personal computer company by revenue and the top seller of laser printers, employees and analysts complain it is not focusing enough on the fast-moving computing environment. The company's earnings fell to $2.9 billion in 1998 from $3.1 billion the year before as it chased Compaq Computer's low personal computer prices.

Hewlett Packard's collegial and innovation-intensive management style has been widely held as a role model for businesses and was cited in the book "In Search of Excellence." David Packard discussed the company's techniques in his book, "The H-P Way," which became a buzzword in corporate America.

"They have been among the best," said Jerry Porras, a Stanford University business professor who studied HP and other companies for his book "Built to Last." "It has continued to be an extremely well-managed company."

On Tuesday, Ned Barnholt, who has been chief of the division that sells measurement devices to the semiconductor and telecommunications industries, was named to lead the new company.

"Not very many $40 billion-plus companies grow at double-digit rates," said Barnholt, who will also oversee the medical division that includes ultrasound, defibrillator and patient-monitoring tools. "We think this increased focus should improve our speed, flexibility and, ultimately, growth in shareholder value."