Whitman oversaw a split previous year that led to the creation of HP Enterprise and a second company, HP Inc, that’s focused on selling PCs and printers.
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Hewlett Packard Enterprise shares rallied nearly 7 percent Wednesday in the wake of the tech giant’s latest quarterly report and plans to spin off its business-services division in a deal valued at $8.5 billion.
Hewlett Packard Enterprise Co (NYSE:HPE) stock climbed more than 11% yesterday during the after-market trading hours, at $18.11. Investor sentiment shows that the decision to create an IT services firm bodes well for both companies in the long run. The merger is expected to be completed by March 2017.
Many Wall Street Analysts have commented on Hewlett Packard Enterprise Co. The two companies had been in talks about a possible merger for around three months and it seems that it is only a matter of time before they start working together. Meg Whitman, meanwhile, will join the board, which will be split 50/50 between directors nominated by HPE and CSC.
Whitman said in a statement that the spin-off and merger will enable a pure play IT services outfit to thrive. “Accelerated cloud migration is a structural hit to long-term server growth”, wrote analyst Katy Huberty, with HPE and Lenovo most at risk.
A focus on low-priced structures and workforce rebalancing has helped HPE’s customer service satisfaction results and its revenue climb to $33 billion. The services unit delivered earnings before taxes of $317 million for the second quarter.
“Our proposed merger with HPE Enterprise Services is a logical next step in CSC’s transformation”, said Lawrie.
The deal gives CSC HPE’s IT outsourcing business. This includes an equity stake in the newly combined company valued at more than $4.5 billion, which represents about 50% ownership, a cash dividend of $1.5 billion, and the assumption of $2.5 billion of debt and other liabilities. The move follows the recent decision by rival Dell to also sell off its IT services business ahead of its acquisition of EMC.
HPE’s “enterprise group” business unit saw revenue rise 7%, year over year, to $7 billion, and that would have been up 10%, if not for the effect of shifting currency rates in the quarter, it said. “I’m neutral on the CSC deal right now”.
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That deal’s likely good for HPE shareholders, Brean Capital says, and the combo of legacy enterprise sales/service with CSC’s innovation pipeline should be able to gain share in IT services. The group reported a 5.2% fall in revenue at $1.81 billion and flat profit at $103 million compared to corresponding quarter 2015.
