Meg Whitman Is Breaking Up HP Labs, Keeping HP's Game-Changing Computer 'The Machine'

One thing Business Insider just learned: the fate of HP's pride and joy, HP Labs, its research facilities with a $3 billion a year budget. Whitman, who put the breaks on acquisitions while she's cleaned up HP's balance sheet, has been looking to HP Labs to develop the company's next round of great products.

A source close to the company tells us HP Labs will be divvied up between the companies because the research being done at the labs is already divided by business group.

For instance, research involving servers, analytics, computer networks, and security will go to the new Hewlett-Packard Enterprise company, run by current CEO Whitman. Projects involving printing and content, will go to the new HP Inc. unit, the PC/printer company.

Meanwhile, Whitman's enterprise company will be keeping "The Machine," HP's potentially game-changing new computer server it demonstrated in June.

The Machine uses new types of memory, computer chips, and operating system and shrinks a data center to the size of refridgerator, drinking just a tiny bit of energy.

Whitman and HP Labs leader Martin Fink view it as a once-in-a-lifetime opportunity and up to 75% of HP Labs employees are reportedly working on it.

We asked Phil McKinney, former vice president and chief technology officer of HP's PC group what he thought about HP's break-up plans. McKinney retired from HP in 2011 and is now president of Cable Labs, and a recognized "innovation" expert. He was there when previous HP CEOs talked about divesting the PC business.

McKinney believes the breakup could help HP turn The Machine from prototype to reality. "With the announcement of The Machine, I strongly believe focus will be key to its success," he told us.

"Removing (distancing, compartmentalizing) distractions is a must-do strategy," he said. "I still think HP's PC/Printer group has room to compete and [with the] split off, some of the historical handcuffs can now come off."

On the other hand, the move is also a huge risk for HP. "These things are never easy on customers and the teams," he said.

Whitman is on the same page, saying this split is all about focus. In an interview with CNBC's David Faber, after the announcement she explained: "More focus, more agility, tying rewards to results, we think is going to make a big difference and propel us on this next level of the journey on our turnaround."