HP Enterprise spins off software businesses in $8.8B deal

PALO ALTO Hewlett Packard Enterprise on Wednesday said it would spin off what it calls its “noncore” software business and merge those operations with United Kingdom -based Micro Focus in a deal valued at $8.8 billion.

Micro Focus, headquartered in Newbury, said the proposed deal with HPE Software is a “rare opportunity” to significantly increase Micro Focus’ scale and breadth.

Micro Focus specializes in software that works with older computer systems.

Kevin Loosemore, executive chairman of Micro Focus, will lead the combined company; and Mike Phillips, chief financial officer at Micro Focus, will serve as CFO.

As part of that process, Whitman previous year split HP’s operations focused on selling business technology products from its personal computer and printer operations.

“Last November, we launched the new Hewlett Packard Enterprise with the vision to become the industry’ leading provider of hybrid IT with the secure next generation software defined infrastructure”, Meg Whitman, CEO of HPE said during her company’s earnings call.

Shares in the Berkshire-based firm rose by 21% after the takeover was announced, according to The Guardian.

Amongst the deal’s terms are a cash payment of $2.5 billion to HPE and ownership of 50.1% of the new company by shareholders of HPE.

“The combination of Micro Focus with HPE Software will give customers more choice as they seek to maximize the value of existing IT assets”, he added”.

HP Enterprise itself is a spin-off from the core Hewlett Packard brand, and has forged its own business model around software and infrastructure needs for cloud, network and enterprises.

HPE paid US10.3 billion to buy Autonomy, months after Oracle had turned down a suggestion to buy the company for half that amount. HPE and Micro Focus declined to comment on the deal, which was first reported by Sky News.

The software assets include areas such as application delivery management, big data and enterprise security. Also Micro Focus will pay HPE $2.5bn in cash.

Post closing, HPE expects to have about $28 billion in annual revenue, down from $52 billion in its last fiscal year ending in October, and way below the $100 billion annual revenue when HP was at its peak.

The two companies have also named SUSE as HP’s preferred Linux partner, using SUSE’s OpenStack expertise around HPE’s Helion OpenStack and Stackato Platform-as-a-Service solutions.