Market Overview

Is HP Enterprise's New Spinoff Yet Another Value Opportunity For Shareholders?

Is HP Enterprise's New Spinoff Yet Another Value Opportunity For Shareholders?

This week, Hewlett Packard Enterprise Co (NYSE: HPE) announced it will once again be spinning off parts of its business. This time, the company is shedding its application delivery management, big data and enterprise security units.

Those units will be combining with units from Micro Focus International to form a brand new company. HP Enterprise will receive a $2.5 billion cash payment, and shareholders will get a 50.1 percent stake in the new company.

HP Enterprise itself was spun off from Hewlett Packard less than one year ago. The former Hewlett Packard split into HP Enterprise and HP Inc (NYSE: HPQ).

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If Hewlett Packard’s last split is any indication, shareholders should be cheering the move. In the three quarters since the HPE spin-off, HP has grown EPS by a third and HPE has upped EPS by 19.5 percent. Since the November split, both stocks have outperformed the S&P 500, and HPE shares have shot up 47.3 percent, making it one of the hottest plays on the market.

HP Enterprise CEO Meg Whitman is confident that the new spinoff will once again enhance shareholder value.

“I believe that the software assets that will be part of the combined company will bring better value to our customers, employees and shareholders as part of a more focused software company,” Whitman wrote this week.

In the 10 years prior to last year’s split, the old Hewlett Packard stock was down 4.6 percent as it struggled to adapt to a changing tech world.

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