Breaking Up Becomes De Rigueur for Big Companies

Breakups of corporate conglomerates have become the new fashion, and CEOs of many big and disparate companies now are having to consider the possibility of splitting up their enterprises even if they have resisted the idea before.

The latest such move was made by Hewlett-Packard CEO Meg Whitman, who decided to split the venerable but troubled IT giant into two companies, one consisting of its slow personal-computer and printer businesses, and the other selling faster-growing computer services, data-storage gear, software, consulting operations and other services for corporate-technology departments.

“Corporations around the world have spun off $1.6 trillion worth of subsidiaries and business lines so far this year.”

It was a major move, but such gambits have become increasingly popular as hedge funds and other investors now are pressing companies to part ways with slower-growing operations and focusing their efforts on the most promising ones as shareholders seek to take advantage of bullish markets and inoculate themselves on the down side. Corporations around the world have spun off $1.6 trillion worth of subsidiaries and business lines so far this year, just behind the record-setting pace of 2007, according to Dealogic.

“Big had long been a synonym for better in corporate America—for CEOs expanding their companies and for investors looking for insulation from sudden changes in markets,” said The Wall Street Journal. “But these days, the sun isn’t shining on empire builders.”

Added The New York Times, “Today, stock market investors are betting on companies with tightly focused visions. Too many divisions are seen as a distraction for management. And activist investors are eager to take small stakes in big companies and call for breakups, betting that profit will follow.”


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