Larry's Notebook

October 17, 2014

Why Companies [HP] Break Up — Bull Market — Medium

Filed under: management — larryang @ 1:51 PM

Why Companies Break Up — Bull Market — Medium.

With rare exceptions, everything that a company does after a breakup (launch products, enter markets, outsource manufacturing, lay off employees, create marketing campaigns, etc.) is something that it could have done before the breakup. A corporate breakup is ultimately an admission of failure: a concession that the mother company’s management wasn’t doing a good job and that their business was too big and complicated for them to handle. HP’s stock went up because investors recognized that the management team was underperforming — so much that it made sense to pay for a whole second set of managers. If investors had thought that HP’s management was doing a great job maximizing the value of its assets, then the breakup should have caused the stock to go down.

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