When Cardinal Health (CAH) spun off CareFusion (CFN) not five years ago, nobody really noticed. Spin-offs weren't in vogue. CareFusion seemed like just another boring medical supply flotsam and jetsam company.
Today, Hewlett-Packard's (HPQ) spin-off of its computer and printer business isn't a big deal either, but for a very different reason. So many companies are emulating the shrink-to-grow model that it has become commonplace. And it produces instant results!
What was little noticed in 2009 because no one cared is now just business as usual because it is expected. You can't get growth if you have one hand tied behind your back. In Cardinal's case that was CareFusion and in Hewlett-Packard's case that's the commodity P.C and printer businesses.
There is no doubt of the worth of these moves. Cardinal Health tripled after it spun off its ho-hum medical device business, although I think only the Cardinal people really understood how good a pure play would be for its company's stock. People wanted a pharmaceutical distribution play, like McKesson (MCK) and AmerisourceBergen (ABC), and the CareFusion- free Cardinal was just what the doctor ordered.
The terrific bid for CareFusion from Becton Dickinson is a sensational affirmation of the continued consolidation in the medical equipment business and the desire of big medical companies to snap up smaller ones to build mass at a time of challenges to their own growth. I like Becton more after this buy, too. There are way too many suppliers into hospitals. This consolidation is most welcome.
The split up of HPQ will allow the company to become more service and enterprise oriented at a time when the printer and commodity P.C businesses just don't generate the kinds of returns that CEO Meg Whitman wants. It's funny, I begged Whitman to do this split as I begged John Donahue to split up eBay (EBAY). Both didn't want to. But they came to their senses after a lot of prodding.
Now, I know HPQ wants to look like a fast-growing EMC (EMC), but it lacks VMWare (VMW). And I liked the big margins of printer cartridges, so it isn't clear if the market will love this deal as it has other split-ups.
But here's a thought. How about if HPQ now rolls out the best 3D printer to go with the other printers? And it does so within the new printer biz?
Wouldn't you want that stock?
Maybe that could turn out to be the better play. Maybe it doesn't matter. As with CareFusion, which gave you more than a double before this bid in a five year period and the big win of pure play CAH, you could make money with both pieces of the new HPQ. I just might take the spin-off over the main biz.
Oh, and if worst comes to worst, it just goes and buys Lexmark (LXK) and crushes the competition.