The sale would help HPE CEO Meg Whitman execute a plan to shift HPE’s strategy to a few key areas such as networking, storage, and technology services since the company separated a year ago from computer and printer makerHP Inc. “And actually, these assets will get more investment with Micro Focus than they would with us”. Completed in 2011, the acquisition has been a big disappointment for the company.
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Loosemore spotted another opportunity to profit from managing old software.
So for HPE to divest more of its assets is noteworthy, but at the same time the company has seen a drop in revenue contributed by holding on to these “non-core” software assets.
“(It) is entirely consistent with our established acquisition strategy and our focus on efficient management of mature infrastructure products”, he told reporters on a conference call from NY. Micro Focus is now one of the largest technology companies in the U.K. Micro Focus’ shares climbed by almost 22% to 2,376 pence in London, posting the biggest intraday gain in over five years. This would be its largest deal to date.
Micro Focus specializes in software that works with older systems companies now use, Mr. Loosemore said in an interview. With these categories, Micro Focus will be able to innovate new technologies that have the lowest possible risk.
In addition to the partnership between HPE and Micro Focus, the German open-source organisation SUSE has also been announced as HP Enterprise’s preferred Linux partner.
A deal is expected to be unveiled in the U.S. at the same time that HPE announces its quarterly earnings after the close of trading on Wall Street on Wednesday, according to sources.
Separately HPE reported better-than-expected earnings in its fiscal third quarter ended July 31.
The transaction is expected to be tax free to HPE.
The spinoff is meant to accelerate the company’s strategy of unlocking faster-growing, higher-margin portions of its business, according to HPE. JP Morgan is advising on the deal and providing financing for the payment. Shareholders will retain a 50.1 percent stake in the company after HPE receives $2.5 billion in cash from the transaction.
Micro Focus is understood to have agreed to pay well over $8bn (£6bn) for the HPE operation, which makes software to help manage business operations, and possibly as much as £7bn.
HP later wrote off three-quarters of the company’s value, accusing Autonomy executives of financial mismanagement. “It does not mean that they are bad assets”, Whitman said of the departing products.
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Other slimming-down moves by HPE include the sale of TippingPoint and a deal that merged some of HPE’s China-based businesses with Tsinghua Holdings to form the new H3C.
