Brean On HP Enterprise, CSC Deal: 'Time To Give HP (& Meg Whitman) Credit For The Creativity'

Hewlett Packard Enterprise Co HPE plans to spin off its enterprise services business, and merge it with Computer Sciences Corporation CSC. Brean Capital’s Ananda Baruah maintained a Hold rating for HP Enterprise, saying that the deal is likely to be beneficial for the company and its shareholders.

“For the equity, after watching a chunk of our coverage struggle to execute traditional services businesses and get valued on the remainder of the businesses, we believe that HPE will be both more focused internally and viewed differently (more favorably) by investors for having done this deal,” analyst Ananda Baruah wrote.

Expectations From The Merger

HP Enterprise’s shareholders will be 50 percent owners of the new entity formed as a result of the deal, and would stand to benefit from the synergies of an estimated $1.5B+.

The transaction is likely to close at the end of the March 2017 quarter. The new entity is expected to generate combined annual revenues of $26B+ and also form a strong organization that targets the market place with “agility, precision, and critical mass,” Baruah said.

The analyst added that the deal represented the combining of HP Enterprise’s legacy enterprise services and sales organization with Computer Sciences Corp’s industry expertise and tech innovation pipeline, which should gain share in the IT services sector.