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How HPE Continues to Streamline Its Business

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Spin-offs with Micro Focus

As seen earlier, Hewlett Packard Enterprise (HPE) announced its first fiscal 2016 results as an independent company following its split from Hewlett-Packard (HPQ) in late 2015. In September 2016, Hewlett Packard Enterprise announced the spin-off and merger of its non-core software assets with Micro Focus. HPE’s non-core software assets include the company’s Application Delivery Management, Enterprise Security, Big Data, IT (Information Technology) Operations Management, Information Management, and Governance businesses. According to HPE, this transaction is valued at $8.8 billion. HPE will own 50.1% of the new combined company.

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In May 2016, Computer Science (CSC) announced a merger with the Enterprise Services segment of Hewlett Packard Enterprise. After the completion of Hewlett-Packard Enterprise’s spin-offs with CSC and Micro Focus, its annual services revenue is expected to reach $28 billion. Hewlett Packard Enterprise expects its recurring revenue stream to account for 60% of its operating profits once the spin-offs are closed.

HPE’s split from H3C

According to a report from StreetInsider, HPE announced the closing of a transaction with an affiliate of the China-based (FXI) Tsinghua Holdings “to create New H3C Group, the leading Chinese provider of technology infrastructure” earlier this year.

As per the agreement, Unisplendour, the affiliate, purchased a 51% stake in New H3C for $2.3 billion. The deal included H3C Technologies as well as HPE’s Server, Technology, and Storage Services businesses in China. HPE stated that it would return cash to its shareholders through share repurchases.

In fiscal 2016, HPE also completed the divestiture of its stake in Mphasis. In HPE’s fiscal 4Q16 earnings call, its CEO, Meg Whitman, said that these spin-offs and mergers would allow the company to “be more nimble, provide cutting edge solutions, play in higher growth markets, and have an enhanced financial profile.”

Investors believe HPE is heading in the right direction with several mergers and spin-offs over the last 15 months. The share price of the firm has risen over 55% since November 2015.

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