Hewlett-Packard Co. has walked away from merger discussions with EMC Corp., Reuters reported today. Reuters reported HP has walked away after "months of fruitless negotiations."

The news comes as no real surprise as there were rumors earlier this month that the two companies were deadlocked over financial terms.

Under Pressure

Neither EMC or HP have commented on the reports, but HP issued a statement earlier today saying that it will resume its share buy-back program, which many financial analysts are interpreting as a sign merger discussions are dead in the water.

Both EMC and HP have been under pressure in recent months to change the way they do business. In fact, just last week, HP announced it was splitting into two public companies

One company will comprise HP’s market-leading enterprise technology infrastructure, software and services businesses, which will do business as Hewlett-Packard Enterprise.The other will comprise HP’s market-leading personal systems and printing businesses, which will do business as HP Inc. and retain the current logo.

The move follows similar actions by companies like eBay and Symantec, which have also started spinning off some of their operations to realize more value from passive assets.

At an IT level, both HP and EMC have been struggling to become more responsive to their respective customer bases in light of tech changes and the rise of cloud computing. 

Industry Shakeout

Most of the bigger IT gorillas have been facing the same problem as the sheer weight of business processes have made it difficult for them to respond to the new, agile IT marketplace.

Microsoft started a realignment of its business units last year just before CEO Steve Balmer left the company. It initiated a new product and business strategy under the title of ‘One,” which aims to pull all its products together and improve communication across the business.

EMC has been under pressure from Elliot Management, which owns 2.2 percent of EMC, to divest some of its assets, including VMWare. EMC, however, has ruled this out.

The other option for EMC was the possibility of merging with HP, which has also struggling to make itself relevant. HP has been trying to recoup some of the $14 billion it spent buying Autonomy in 2008, which led to a $14 billion write down last year.

HP’s Response

Under Meg Whitman, HP appears to have received a kiss of life and its Autonomy business has been cranking out new releases and upgrades at an astounding rate.

But it’s not just Autonomy. Whitman has been pushing for the renewal of HP based on innovation and in-house technology.

It's not clear why the discussion with EMC were called off, but again price has been mentioned as a factor. 

But it may not be such a bad thing for the IT industry in general that the talks have failed. A straight merger of the two would have created the biggest data storage provider in existence as well as access points to just about every organization on the planet.

If one of really creative forces in IT is innovation by small, agile companies — and think of the development of the Internet of Things in this respect — then the existence of yet another unruly IT gorilla would probably be unhealthy.

The talks are allegedly off for good. But those are often famous last words.

You may recall the discussions between IBM and Lenovo over the sale of the x86 chip business. Discussions were "over for good" — before Lenovo  became the proud owner of that former IBM business. Who is to say that a similar fate doesn’t awaits these discussions?