Loading the player...

What is 'Unbundling'

Unbundling is a process by which a company with several different lines of business retains core businesses and sells off assets, product lines, divisions or subsidiaries. Unbundling is done for a variety of reasons, but the goal is always to create a better performing company or companies. Unbundling may also refer to offering products or services separately that had been packaged together.

BREAKING DOWN 'Unbundling'

Unbundling may be called for by the board of directors or by company managers. The board of directors may call for it if the company’s stock is performing poorly and/or the company needs to raise capital or wants to distribute cash to shareholders. Management might call for it if it thinks the result would perform better. When the board or managers calls for unbundling, it often improves the company’s stock price. Unbundling might also occur when one company purchases another for its most valuable divisions but has little use for other aspects of the business.

Example of Unbundling

When a company unbundles, it may maintain a significant percentage of ownership in the new firm(s). In 2001, Cisco unbundled a division that became Andiamo, but it retained some ownership because it wanted to be involved in the development of a new product line that would give it a competitive advantage.

RELATED TERMS
  1. Classified Board

    A classified board is a structure for a board of directors where ...
  2. Retained Cash Flow - RCP

    Retained cash flow includes remaining cash after expenses and ...
  3. Business Judgment Rule

    The business judgment rule helps to guard a corporation's board ...
  4. Directorate

    An organization headed by a director. In finance, directorate ...
  5. Wrap Fee

    A wrap fee is a comprehensive charge levied by an investment ...
  6. Independent Outside Director

    An independent outside director is a member of a company's board ...
Related Articles
  1. Tech

    3 Predictions for TV in the Next 10 Years

    Understand current technological trends in the TV industry and what has changed in the past. Learn about three predictions regarding the future of TV.
  2. Insights

    Netflix May Produce Bollywood-Style Original Shows, Says CEO

    First Blockbuster, now cable companies? Find our how Netflix's popular streaming service is forcing the television industry to adapt or die trying.
  3. Insights

    Top 3 Banking Platforms Taking Off in Fintech

    Fintech companies are shaking up the financial industry, and these banking platforms are poised for growth in 2017.
  4. Investing

    Google in 'Final Stages' of Negotiations to Buy HTC's Smartphone Biz: Report

    Google is close to acquiring HTC's smartphone arm, according to Taiwanese news outlet Commercial Times.
  5. Financial Advisor

    Fund Boards: What They Do and Why You Should Care

    Fund boards oversee management and operations of the fund on behalf of shareholders. Make sure you've got a board that will look out for you.
  6. Managing Wealth

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
  7. Personal Finance

    Basic Economy: Pay the Same, Get Less?

    Basic economy is supposed to be cheaper, but are you just paying the previously regular economy fare and getting less for it?
RELATED FAQS
  1. How are retained earnings related to a company's income statement?

    Understand what a company's statement of retained earnings represents and how it is related to a company's other financial ... Read Answer >>
  2. What's the difference between retained earnings and revenue?

    See why retained earnings and revenue are both considered important measurements of a company's financial performance, and ... Read Answer >>
  3. How is revenue related to retained earnings?

    Learn what business revenue is and how it relates to retained earnings. See how accountants calculate these key figures and ... Read Answer >>
  4. Who is responsible for protecting and managing shareholders' interests?

    Several parties are supposed to be responsible for protecting and managing shareholders' interests, including the company's ... Read Answer >>
Hot Definitions
  1. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  2. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  3. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  4. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  5. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  6. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
Trading Center