Breaking Up Becomes De Rigueur for Big Companies

Hewlett-Packard faced acute challenges in the slowdown of its traditional hardware business and the need to keep up with competitors such as Apple that are exploiting cloud-based services. But when the company announced a similar plan in 2011, investors balked because they were afraid each enterprise would be too vulnerable separately, and the CEO who proposed it was ousted. How times have changed.

“Immelt already has disposed of certain parts of the GE conglomerate—such as appliances, and retail finance—only to find that he hasn’t done enough to please some equity-fund managers.”

Whitman’s move increases the focus on CEOs of other companies who have been pestered lately by activist investors to do something similar. They include PepsiCo CEO Indra Nooyi, DuPont CEO Ellen Kuhlman, Dow Chemical CEO Andrew Liveris and General Electric CEO Jeffrey Immelt. None of them face difficulties as imminent as those that confronted HP’s Whitman, but their gadfly shareholders are just as intent. For example, Immelt already has disposed of certain parts of the GE conglomerate—such as appliances, and retail finance—only to find that he hasn’t done enough to please some equity-fund managers.

It helps the cause of the breakup activists that some recent splits have gone relatively well. Kraft Foods and Mondelez, for example, arguably are faring much better separately—the former, with CEO W. Anthony Vernon running mostly domestic and traditional grocery brands such as Velveeta and Oscar Mayer; the latter, with CEO Irene Rosenberg supervising faster-growing global and snack brands including Oreo and Cadbury—than they did together under the old Kraft Foods umbrella.