HPE, which was spun off a year ago by Hewlett Packard, is now spinning off and merging its software business with UK-based Micro Focus in an effort to build shareholder value.
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Micro Focus, based in Newbury, England, is one of Britain’s largest technology companies, and coincidentally is replacing ARM Holdings Plc – the chip designer whose sale to Japan’s Softbank was completed this week – in the FTSE-100 index.
For the deal, HPE will subsidize its software business assets in areas including big data analytics, application delivery management and enterprise security to Micro Focus for $2.5 billion in cash.
With the Micro Focus and CSC deals, Whitman said, HPE “will be a faster-growing, higher-margin and stronger free cash flow company, well positioned for the future”.
Some of Micro Focus’ previous acquisitions include Attachmate (2014) and Borland (2009).
Micro Focus sees the deal as a rare opportunity that will allow the company to quickly and efficiently increase the scale of its operations.
HP later wrote off three-quarters of the company’s value, accusing Autonomy executives of financial mismanagement.
HPE would contribute its software businesses in areas such as application delivery management, big data analytics and enterprise security to Micro Focus, the Palo Alto, California-based company said in a statement after United States markets closed. Its Enterprise Group revenue was $6.5 billion, down 8% year-on-year, while Enterprise Services revenue dropped 5% to $4.7 billion.
HPE disclosed the arrangement along with its Q3 earnings in which the company’s net revenue slid six percent from last year to $12.2 billion as its GAAP net earnings rose to $1.32 a share from the year earlier’s $0.13, well above the top end of guidance. Also, with this merger, Micro Focus and HPE announced the intent to enter a commercial partnership naming SUSE as HPE’s preferred Linux partner. The spin-off will operate under the name Micro Focus and will be run by its executives. Micro Focus will continue to be listed on the London Stock Exchange. The merger is still subject to closing conditions, but the transaction is expected to finalize in the third quarter of 2017.
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The move follows the announcement in May that Hewlett Packard Enterprise would merge its technology-services division with Computer Sciences Corp.in a deal valued at about $US8.5 billion.
