Raptec was incorporated in 1991 and went public on the Nasdaq Stock Market in 1996. Raptec's strategy is to become the global leader in innovative storage solutions. Raptec is an S&P 500 and a Nasdaq Stock Market 100 member. The company's hardware and software solutions for eBusiness and Internet applications move, manage, and protect critical data and digital content. Raptec operates in three principal business segments: Direct Attached Storage ("DAS"), Storage Networking Solutions ("SNS") and Software. These hardware and software products are found in high-performance networks, servers, workstations, and desktops from the world's leading OEMs, and are sold through distribution channels to Internet service providers, enterprises, medium and small businesses, and consumers.

Since the time it went public, Raptec has experienced rapid growth and consistently profitable operations. In early 2007, the company announced its plan to spin-off the software segment, subsequently incorporated as Axio, Inc., in the form of a fully independent and separate company. Software was Raptec's most profitable and fastest growing segment. By mid-2007 Raptec had completed the initial public offering of approximately 15% of Axio's stock, and then distributed the remaining Axio stock to Raptec's stockholders in a tax-free distribution.

Question 1: Why would a successful firm like Raptec spin off its most promising business?

Question 2: Prior to the spin-off, how would you go about identifying the respective boundaries of the Raptec and Axio businesses?

Question 3: What risks does Raptec run in spinning off Axio?