10/31/11
There have been cases where spinning off a division has created a significant amount of tension in both a company and the stock market. The article below talks about how HP has decided to not spin off the companies personal systems group despite the fact that it might be the best decision for he company to do just that.
The reason the company has decided to stop the spin off is because of a change in CEO's. The new CEO believes that the core business needs to remain intact. Personally I believe she is correct in this viewpoint for the time being. HP very poorly handled the attempt to spin off their personal systems group and had it been done in a more thought out manner could have been successful. The process does need thought out before it is done however. http://allthingsd.com/20111031/spinning-off-hps-pc-business-could-have-worked-couldnt-it/?mod=googlenews
Spinning off a division that has been successful in the past can create potential problems for a company. Similar to the Time Warner case, Netflix is looking at spinning off a considerable piece of the company into a separate entity. This spin off has it's inherent risks as well.
Netflix has been a company that has created significant goodwill with their brand name. This goodwill has been strained first by a price increase and now by the proposed spin off of their DVD by mail business. As Reuters mentions the company has experienced a backlash from consumers, and has taken a severe decrease in stock price.
Unlike Time Warner however Netflix does not have a significant level of synergy between it's two businesses. Netflix's two business models actually require two separate licensing agreements. The agreement for their streaming business means that they have to pay a fee to the studios for every consumer they have, even if the consumer is DVD only. This is the primary reason they feel the need to spin off the DVD business.
There have been cases where spinning off a division has created a significant amount of tension in both a company and the stock market. The article below talks about how HP has decided to not spin off the companies personal systems group despite the fact that it might be the best decision for he company to do just that.
The reason the company has decided to stop the spin off is because of a change in CEO's. The new CEO believes that the core business needs to remain intact. Personally I believe she is correct in this viewpoint for the time being. HP very poorly handled the attempt to spin off their personal systems group and had it been done in a more thought out manner could have been successful. The process does need thought out before it is done however.
http://allthingsd.com/20111031/spinning-off-hps-pc-business-could-have-worked-couldnt-it/?mod=googlenews
Spinning off a division that has been successful in the past can create potential problems for a company. Similar to the Time Warner case, Netflix is looking at spinning off a considerable piece of the company into a separate entity. This spin off has it's inherent risks as well.
Netflix has been a company that has created significant goodwill with their brand name. This goodwill has been strained first by a price increase and now by the proposed spin off of their DVD by mail business. As Reuters mentions the company has experienced a backlash from consumers, and has taken a severe decrease in stock price.
Unlike Time Warner however Netflix does not have a significant level of synergy between it's two businesses. Netflix's two business models actually require two separate licensing agreements. The agreement for their streaming business means that they have to pay a fee to the studios for every consumer they have, even if the consumer is DVD only. This is the primary reason they feel the need to spin off the DVD business.
Sources:
http://www.reuters.com/article/2011/09/19/idUS14369079220110919