Hewlett-Packard’s annual financial analyst conference started on shaky ground last week, with Merrill Lynch publishing a report calling for the breakup of the company just the day before.

"We recommend that management break up the company within the next few years," wrote Merrill Lynch VP Steven Milunovich in a four-page report, which proposed two splits: a division into either a printer and a computer company or into two consumer-end enterprise entities.

If splitting up the company has crossed Carly Fiorina’s mind, she is not letting on. At the conference, Fiorina described an HP that, following its contentious 2002 merger with Compaq, was now tailor-made for an increasingly digital and wireless world.

Fiorina cited HP sales to companies such as special effects company Dreamworks as the kind of markets HP, fortified by its diverse product portfolio, was now better equipped to pursue. Fiorina also argued that by owning a vast portfolio of technology, including approximately 21,000 patents, HP was now better able to compete with rivals IBM and Dell.

"This is the world that we built this company for," Fiorina said. "We have been through, as a company, a lot of change over the last several years. All of that heavy lifting is behind us."

But the four-page Merrill Lynch report may rekindle concerns about the HP-Compaq merger. Although Milunovich agreed that the Compaq acquisition was a "necessary" move, he wrote that "both printers and computers would be better managed if they were separate".

Separating HP’s printer business from the rest of the company might make sense, said Clyde Poole, director of research and development at TecSys Development, an HP customer and ISV. "If you look at it dispassionately, what does the printer business have to do with the rest of the business?" he asked. From a customer perspective, "the people who buy the printers or who drive the purchase of printers are not necessarily the IT people," he added.

"The fact is that HP has two very different companies right now," said Gordon Haff, an analyst at Illuminata. Haff believes it is still too soon to decide whether HP has been unable to find its focus since the merger, but he agrees that by spinning off its digital imaging products HP could create an interesting company. "It’s not clear that there is really a great deal of leverage between enterprise servers and that great consumer side of the company," Haff said.