HP waves goodbye to its software side in $8.8 billion deal


"With the HPE division Micro Focus gets a mixture of more mature product lines (Mercury Software) and faster growing businesses in hot market sectors like data analytics (Vertica, Autonomy) and enterprise security (ArcSight, Fortify), plus some additions to its existing application delivery management tools", said Abbott.

HPE CEO Meg Whitman is trying to create a company better able to compete with Dell Technologies, following its just-completed acquisition of EMC, as well Cisco and IBM, as large companies shift spending to cloud computing services.

The deal, announced September 7, comes after weeks of speculation that HPE was looking to shed the software business as part of the continued restructuring of the company since Hewlett-Packard split in two in November 2015 to create HPE and HP Inc., which sells PCs and printers.

Under the deal, HP Enterprise shareholders are expected to end up with Micro Focus shares now valued at about $ 6.3 billion.

However, that company will be under the Micro Focus brand name, not HPE, with Kevin Loosemore, Micro Focus chief executive, cited by the FT as saying: "We have total control of what is happening".

"[The HPE deal] would be the biggest acquisition by a British company of a foreign tech firm, and comes in the face of a massive drop in the value of the pound that has made United Kingdom firms the target of overseas bidders". At its height, the combined HP generated more than $100 billion annual revenue. "We are in regular contact with most players in the mature software space, it's what we do, and HPE had just separated from HPI [HP Inc] at the back end of a year ago and I was personally intrigued as to what their new strategy was going to be". The accord with Micro Focus, a multinational software firm based in Newbury, United Kingdom, was reported together with HPE's recent quarterly earnings.

For the third quarter of fiscal year 2016, HP Enterprise posted $0.49 in earnings per share, beating the consensus by three cents a share. Net income soared to $2.27 billion, or $1.32 per share, thanks to a hefty gain on an asset sale.

On an adjusted basis excluding one-time gains and charges, HP Enterprise put per share profit at 49 cents, compared with 45 cents in the year-earlier period. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 45 cents per share. However, HPE's revenue total fell short of analysts' estimates of $12.6 billion. Revenue, however, came in at $12.2 billion, missing the Street's $12.6 billion forecast. The company expects full-year earnings in the range of US$1.90 to US$1.95 per share. The 52-week high of the share price is -1.11% and 52-week low of the share price is 44.52%. Once the latest transactions are closed next year, HP Enterprise's head count will have declined from about 210,000 to between 50,000 and 60,000, Ms. Whitman said.

Several hedge funds recently made changes to their positions in the stock.