Hewlett Packard Enterprises Continues To Find Ways To Create Value For Shareholders

Hewlett Packard Enterprise Co HPE announced plans for a spin-off and merger of its Application Software business with Micro Focus MCFUF. This represents another “creatively powerful” way planned by Hewlett Packard Enterprises to create shareholder value, Brean Capital’s Ananda Baruah said in a report. He maintained a Hold rating on the company.

“What is clear to us is that HPE is cultivating compelling solutions in areas across the server, storage, networking and security cloud stack. And they also have a plan for the coming years in the context of current and future IT trends,” analyst Baruah wrote.

Spin, Merge And Add Value

Hewlett Packard Enterprise plans to spin-off and merger most of its software assets with Micro Focus. Hewlett Packard Enterprise would own 50.1 percent in the new software company, which would be valued at ~$8.8 billion. The company would also receive a cash payment of $2.5 billion.

The new entity would have $4.5 billion in annual revenues, of which Hewlett Packard Enterprise’s Application Software business would be about 70 percent.

The assets being spun off include application delivery management, big data analytics, cloud, and enterprise security, while the core hardware infrastructure enabling software would continue to be in Hewlett Packard Enterprise’s portfolio, Baruah mentioned.

“HPE believes that a ~50% stake will allow HPE shareholder to participate in the value creation process in a tax-free manner,” the analyst noted.

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