HP’s Post-Split PC, Printers Company Seen Taking More Debt

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HP's Post-Split PC Company Is Liable for Most of Debt

HP Inc., the personal computer and printer company that will emerge from the split of Hewlett-Packard Co., could be liable for most of the debt of the parent company, a regulatory filing suggests.

Hewlett-Packard Enterprise, the other post-split entity that will focus on corporate computers and services, had total debt of $1.45 billion, excluding its finance arm, as of April 30, 2015, according to a filing with the U.S. Securities and Exchange Commission Wednesday. The unified Hewlett-Packard had $21.06 billion in long-term and short-term borrowings as of that date, according to data compiled by Bloomberg. The data suggests that a larger portion of debt obligations is attributable to HP Inc., though the company said it hasn’t determined the final totals.

When the split was announced in October, Chief Financial Officer Cathie Lesjak said Hewlett-Packard Enterprise would hold little debt and have “a robust balance sheet” with its liabilities mainly related to its leasing business.

“The actual core operating company balance sheet is going to be relatively debt free, and therefore provide opportunities for both organic as well as targeted M&A partnership,” Lesjak said of Hewlett-Packard Enterprise at the time.

The final debt distribution between the two new companies hasn’t been finalized. Hewlett-Packard said it may transfer some balance sheet items to HP Enterprise after the split.

HP Enterprise will have less predictable business units with greater opportunity for growth, while HP Inc. will inherit the cash-generating PC and printer businesses.

Hewlett Packard Enterprise

The enterprise company, which will trade under the stock symbol HPE, had total sales of $55.1 billion and net income of $1.65 billion in the company’s last fiscal year, according to the filing. Its total addressable market is a trillion dollars, Hewlett-Packard estimates.

Hewlett Packard Enterprise faces more challenges than HP Inc., because it’s seeing rapid adoption by information-technology customers of cloud-computing technologies. A sluggish global economy and tight IT spending by governments are also weighing on demand.

Meg Whitman, Hewlett-Packard’s current chief executive officer, will lead the enterprise company, with Martin Fink taking the role of chief technology officer and Christopher Hsu as chief operating officer. Lesjak will become Chief Financial Officer of HP Inc.

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