With this move, the USA company will slim down its overall operations and shift focus to other key business operations.
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HPE president and CEO Meg Whitman: “Today’s announced spin-merge of our non-core software assets with Micro Focus is another important step in our strategy to unlock a faster growing, higher margin, stronger cash flow company”. For the period ending July 31, HPE earned $1.32 a share, up from 13 cents a share in same quarter past year, on revenue of $12.2 billion.
The merged business would account for annual revenues of $4.5bn now, Micro Focus said.
The “spin-merger” is expected to close in Q3 2017, and sees HPE trying to sweat more out of its software assets, including its struggling Autonomy business. HP said it would pay $700m in one-time costs related to the separation of the assets.
That move was meant to form a key part of HP’s move into software, but HPE later wrote off 75 percent of Autonomy’s value, accusing its executives of financial mismanagement.
Kevin Loosemore, executive chairman of Micro Focus, will lead the combined company; and Mike Phillips, chief financial officer at Micro Focus, will serve as CFO.
As part of that process, Whitman a year ago split HP’s operations focused on selling business technology products from its personal computer and printer operations.
An $8.8bn (£6.6bn) deal will create the UK’s biggest software firm after Hewlett-Packard Enterprise (HPE) agreed to divest itself of part of its software business. On the books, cash and cash equivalents totaled $10.74 billion at the end of the quarter, versus $9.84 at the end of the previous fiscal year.
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However, Whitman was quick to maintain that even with the spinoff, HPE isn’t getting out of the software business, and that the company would “double down” on its remaining software offerings, especially those for cloud-based technologies. 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 company has said that software revenue growth has been challenged by a market shift toward cloud subscription services. This equity stake in Micro Focus is valued at approximately $6.3 billion based on the closing price of Micro Focus shares as of market close on September 5, 2016. It had in the same month also inked a deal to sell a computer services business that employed 100,000 people.
