If private equity firms had their way, Hewlett-Packard Co would look less like a monolithic tanker and more like a small fleet of streamlined schooners.

Private equity firms including Blackstone Group, Kohlberg Kravis Roberts and TPG Capital would like HP to break up and sell them some of its units, arguing that the world's No.1 PC maker and tech powerhouse is stretched too thin, according to people familiar with the matter.

HP Chief Executive Leo Apotheker is having none of that for now, sources told Reuters. But pressure from investors is likely to increase if he cannot quickly improve the performance of a company that has missed Wall Street targets for two quarters.

Private equity were like termites or locusts swarming around them over the past few months, said one person with knowledge of the situation, who like other sources spoke on condition of anonymity.

The guy at the top said, 'We are not breaking it up. We see value in the whole thing. Apple is the benchmark and they have put together software and hardware and consumer and corporate, and that's what we want to do.'

HP, TPG, Blackstone and KKR declined to comment.

On Thursday, following the Reuters report, shares of the world's largest technology corporation by revenue leaped as much as 4.7 percent, their biggest single-day gain in over a year. They were up nearly 3 percent at $36.56 in afternoon trade.

Private equity firms, looking to line their own pockets, have circled HP for years, during the turbulent tenure of Carly Fiorina and after IBM sold its PC unit in 2004 to focus more on software and services.

Calls for a break-up of HP had quieted during Mark Hurd's era as he pushed through cost cuts and boosted the performance of individual businesses to combat stagnant revenue growth.

But after Hurd left and HP trimmed its revenue growth forecast twice in a row, chatter about HP has gained volume in Silicon Valley. Could HP's computing, printing and enterprise services businesses be worth more apart than the company's current $72 billion market capitalization?

There's speculation today that private equity firms are looking at HP in terms of perhaps taking the whole thing private or even parts of it, said Shaw Wu, analyst with Sterne Agee. It makes a lot of sense. HP stock is arguably undervalued, and that's when the private equity guys swoop in.

ALL CARDS ON THE TABLE

HP's low-margin but high-volume PC business is seen as the most vulnerable asset, given intense competition and the slide in consumer PC demand. Another unit seen as a likely candidate for a spinoff is the lucrative printing unit.

I could see HP peeling off some of the divisions, perhaps those that are less profitable, said Michael Yoshikami, CEO of YCMNET Advisors, a minor shareholder in HP. As management is continuing to try to figure out exactly what they are going to do to grow the company, I think all the cards are on the table.

However, such moves would be a dramatic restructuring for a company that generated $126 billion in revenue and $8.8 billion in profit in its last fiscal year.

HP's personal systems group, which includes PCs, accounted for 13 percent of profit; printing and imaging pulled in 30 percent; and enterprise, which includes storage and services, was 56 percent. (See graphic: http://r.reuters.com/paq42s)

Leo is still in the early stages, trying to figure out what he is doing with HP, said a source familiar with the company. One of the things they like is their sheer size. If you tried to break it up, you would have the consumer side, you would have hardware, a portfolio of questionable software, and obviously services. It doesn't make a lot of sense.

Bankers and company insiders do not expect Apotheker to make drastic changes in the near term. A sale of any unit would be hugely complicated, with profits subject to hefty taxation unless HP could find a way to spin off the entities.

Investors are willing to give the former head of SAP AG more time to deal with uneven operations and lower costs, as he attempts to take HP into new markets such as cloud computing and tablet computers.

Its new TouchPad is set to launch next month.

Influential Wall Street reviewer Walt Mossberg said the TouchPad's poor battery life, paucity of apps and other shortcomings rendered HP's tablet market entrant a pale rival to Apple's iPad. The New York Times' David Pogue cited other deficits, including the lack of a back-facing camera and slow processing speeds.

Pressure on Apotheker will increase if HP's much-touted WebOS platform, which it acquired with Palm Inc, fails to deliver on its promise to become the operating software for all the company's mobile devices and applications.

They are launching these Palm-based devices, we will see how those go, said one of HP's top 10 shareholders, who declined to be identified. If those don't work, one would think there would be room to make decisions there.

BLEEDING VALUATION

There's no question many shareholders are unhappy with HP's share performance. Since Apotheker took over eight months ago, the stock is down 13 percent, compared with a 30 percent rise in the Nasdaq composite index.

HP's market cap of $72 billion is far lower than its estimated annual revenue of $129 billion this year. By comparison, Oracle's market cap of $164 billion dwarfs estimated revenue of $36 billion, and IBM's market cap of $201 billion is double forecast revenue.

Some say a breakup would benefit Apotheker and HP. HP could narrow its focus to enterprises, get out of slow-growth businesses and bring more clarity to its brand, said the top 10 shareholder, who did not want to be identified as his firm remains a long-term investor.

At least one division head has approached Apotheker about offloading parts of the company, the first source said.

A continued slide in HP's stock price and another couple of weak quarters could pave the way for private equity groups to swoop in and try to pick off valuable units.

HP is no stranger to divestitures. In 1999, it spun off its measurement and components businesses to form a new company, Agilent Technologies, which eventually went public.

Printing could be one they look at to get rid of if you believe the significance is going to continue to decline, said Eric Jackson, founder of Ironfire Capital LLC, a hedge fund that owned HP stock earlier this year. PCs, that would be a more difficult thing to walk away from because it has defined these people for so long.

(Additional reporting by Edwin Chan; Editing by Paul Thomasch, Tiffany Wu and Bernard Orr)

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