Hewlett-Packard En­ter­prise shrinks again in $8.8b spinoff

China Daily (USA) - - Q&A WITH CEO -

Hewlett-Packard En­ter­prise Co will spin off a big chunk of its busi­ness soft­ware lineup in an $8.8 bil­lion deal with Mi­cro Fo­cus In­ter­na­tional Plc, con­tin­u­ing the un­rav­el­ing of what once was Sil­i­con Val­ley’s largest com­pany.

The Palo Alto, Cal­i­for­nia-based com­pany said on Wed­nes­day that it will get a $2.5 bil­lion cash pay­ment and its share­hold­ers will hold a 50.1 per­cent stake in the new com­bined com­pany.

HPE is spin­ning off units in­clud­ing ap­pli­ca­tion de­liv­ery man­age­ment, big data and en­ter­prise se­cu­rity. HP En­ter­prise, also known as HPE, plans to fo­cus on sell­ing data-cen­ter hard­ware and other com­mer­cial tech gear to other big or­ga­ni­za­tions.

Mi­cro Fo­cus, based in Newbury, Eng­land, said the sur­viv­ing com­pany will have an­nual rev­enue of about $4.5 bil­lion.

The soft­ware spinoff comes three-and­half months af­ter Hewlett-Packard En­ter­prise an­nounced the sale of its busi­nessser­vices di­vi­sion to ri­val Com­puter Sci­ences Corp for $8.5 bil­lion.

The over­haul marks an­other step in CEO Meg Whit­man’s ef­fort to trans­form the once-mighty tech­nol­ogy con­glom­er­ate into a leaner, more ef­fi­cient com­pany ca­ter­ing to a few core mar­kets that she be­lieves will be most likely to grow in the fu­ture.

As part of that process, Whit­man last year split HP’s op­er­a­tions fo­cused on sell­ing busi­ness tech­nol­ogy prod­ucts from its per­sonal com­puter and printer op­er­a­tions. At its height, the com­bined HP gen­er­ated more than $100 bil­lion an­nual rev­enue.

Now, HPE is turn­ing into a shell of what it was at the time of last year's spinoff from the PC busi­ness. Af­ter its shake-up is com­pleted, HPE ex­pects to have about $28 bil­lion in an­nual rev­enue, down­from $52 bil­lion in its last fis­cal year end­ing in Oc­to­ber.

The deal with Mi­cro Fo­cus still re­quires an­titrust ap­proval. If all goes as an­tic­i­pated, it should close some­time be­tween April and Oc­to­ber next year.

Sep­a­rately HPE reported bet­ter-than-ex­pected earn­ings in its fis­cal third quar­ter ended July 31. Net in­come soared to $2.27 bil­lion, or $1.32 per share, thanks to a hefty gain on an as­set sale. Earn­ings, ad­justed for the gain and re­struc­tur­ing and other costs, were 49 cents per share.

The re­sults ex­ceeded Wall Street ex­pec­ta­tions. The av­er­age es­ti­mate of 10 an­a­lysts sur­veyed by Zacks In­vest­ment Re­search was for earn­ings of 45 cents per share.

Rev­enue slipped about 6 per­cent year-onyear to $12.21 bil­lion, miss­ing Street fore­casts. 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 58 cents to 63 cents. On av­er­age, an­a­lysts sur­veyed by Fact­Set ex­pect earn­ings per share of 61 cents.

The com­pany ex­pects full-year earn­ings in the range of $1.90 to $1.95 per share. That com­pares with the av­er­age Fact­Set es­ti­mate of $1.88 per share.

HP En­ter­prise shares have in­creased 45 per­cent since the be­gin­ning of the year.

Meg Whit­man, chief ex­ec­u­tive of­fi­cer of Hewlett-Packard En­ter­prise Co.

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