HP Enterprise to close $8.8 billion software deal (HPE)

Hewlett Packard Enterprise (HPE) will spin off its software business and merge it with United Kingdom -based Micro Focus International, continuing a restructuring of one of Silicon Valley’s venerable companies amid the rise of cloud computing. Shareholders will retain a 50.1 percent stake in the company after HPE receives $2.5 billion in cash from the transaction.

The segment, which includes big data, enterprise security, software delivery and test, and IT operations management, contributed to an 18% drop in revenue to $738 million for HPE’s software division in the company’s latest quarterly results, released yesterday.

That move was meant to form a key part of HP’s move into software, but HPE later wrote off 75 percent of Autonomy’s value, accusing its executives of financial mismanagement.

Hewlett Packard Enterprise has agreed to sell most of its software businesses to Britain’s Micro Focus International for $8.8 billion, furthering its strategy of focusing on cloud-based IT solutions.

HP Software posted US$3.6 billion in revenue past year, with the division blaming changing technology trends for the 8% decline in earnings.

“As a matter of policy, HPE does not comment on rumours and speculations”, the company said in an e-mail response to an AFP inquiry.

The deal is worth $8.8 billion and will help focus the company on key areas like networking, storage and technology services, Reuters reports. Revenue declined to $12.2 billion from $13.06 billion.

With the deal, HPE frees itself of the last of its $11 billion acquisition of British software maker Autonomy Corp. If all goes as anticipated, it should close sometime between April and October next year. The adjusted outlook excludes an after-tax gain on the divestiture of Mphasis and other assets of United States dollars 0.23, and after-tax costs of USD 0.37 per share for restructuring, separation, amortization of intangible assets, loss from equity interests, acquisition and other related charges and tax indemnification adjustments. Seven analysts surveyed by Zacks expected $12.59 billion.

For the current quarter ending in October, HPE expects its per-share earnings to range from US$0.58 cents to US$0.63.

The company also reported Q3 non-GAAP earnings of $0.49 per share, better than the analyst consensus of $0.45 per share on Capital IQ.

The latest transaction, valued at approximately $8.8 billion (£6.6 billion), is the largest deal made by any United Kingdom company for some years and is expected to close in Q3 2017. That compares with the average FactSet estimate of $1.88 per share.