H-P, based in Palo Alto, Calif., is considering an initial public offering of 15 percent of the test-instrument firm's shares by the end of the year, the company said in a press release. If the IPO does occur, the rest of the shares will be given tax-free to H-P shareholders, according to the company.
Shares of Hewlett-Packard, a component of the Dow Jones Industrial Average, jumped 7, or 11 percent, to 72 7/8 after being halted most of Tuesday morning.
"We are taking this action to sharpen the strategic focus of our businesses, improve their agility and increase their responsiveness to customers and partners," said Chairman Lewis Platt, who the company said spearheaded the restructuring plan. He said the breakup "will enhance the two new companies' growth and earnings potential."
H-P's measurement business totaled $7.6 billion of its $47.1 billion in 1998 revenue, according to the company. H-P has not decided yet on a name for the business.
Hewlett-Packard will retain its world-famous name for the computing, software and printing and imaging-product business.
Each H-P shareholder will have a stake in both companies. If it receives the OK from tax and regulatory agencies around the world, H-P said the change in its business will probably close in the first half of 2000.
Each company will have its own research-and-development unit. They will be managed separately to "better focus on growth in their individual markets," H-P said.
Platt will stay on as chairman, chief executive and president of H-P through the transition. H-P's general manager of the existing measurement business, Edward Barnholt, will become chief executive of the new measurement company.
A search will be held to find a chief executive for its computing and imaging business, H-P said.
The company said it does not see "significant overall workforce reductions" from the restructuring. "This announcement is not about major short-term cost reductions," said Robert Wayman, H-P's chief financial officer.
Any changes in the company's workforce will be done through attrition, redeployments and flex-force adjustments, he said.
Written By Tiare Rath, CBS MarketWatch