News

Diversified Companies Splitting Into Separate Parts

An accelerating trend in corporate America is for diversified firms to split into homogenous, highly specialized parts.  For example, Xerox is dividing itself into two publicly traded companies, one containing its office machines and the second housing its services operations.  Xerox’s services include bill processing, managing call centers, and doing back-office services for government agencies and corporations.  Another technology firm, HP split previously into HP Enterprise Inc. that focuses on servers, services, and software, and HP Inc. that sells personal computers and printers.  E-bay too recently split its PayPal payments-processing division off into a separate company.  Firms are finding that their homogenous parts are worth more in terms of market capitalization, and operate more efficiently and effectively, as separate firms, than within a large, diversified organizational structure.  Typically what spurs a company to split into separate parts is faltering performance led by declining revenues and profits.

 

Source:  Based on Dana Mattioli, David Benoit and Drew FitzGerald, “Xerox to Split, Reversing Strategy,” Wall Street Journal, January 29, 2016, A1-A2.

Comments are closed