HPE shares fell last night after the firm announced falling sales and profit and the so-called spin-merger of its non-core software assets with Micro Focus. Its CEO Meg Whitman insisted that the move does not signal that the company is getting out of software.
HPE will sell off and merge its software assets - including Application Delivery Management, Big Data, Enterprise Security, Information Management and Governance and IT Operations Management businesses - with Micro Focus in a transaction valued at around $8.8bn (£6.6bn). The firm claims the duo's portfolios are "highly complementary" and create one of the world's largest pure-play software companies.
The move is not HPE's first 'spin-merger' - it did the same thing in May, selling its Enterprise Services arm to CSC. On both occasions, HPE said the moves will enable it to remain more agile and focused.
Following the announcement yesterday afternoon, HPE's share price fell three per cent to $21.35 per share, but then recovered to just under $22.
In the three months to 31 July, HPE's net revenue came in at $12.2bn, down six per cent annually, but down one per cent when adjusted for divestitures and currency. GAAP net profit at the firm rose 914 per cent over the same period to $2.3bn, but on a non-GAAP basis, net profit fell four per cent to $800m. In Q3 last year, HP still reported as one company, prior to the split which occurred on 1 November.
Whitman made it clear that today's Micro Focus news does not signal HPE's intent to exit software.
"I want to be crystal clear - HPE is not getting out of software," she said. "Software is still a key enabler of our go-forward strategy, but we need the right assets to win in our target markets. Moving forward, we will double down on the software capabilities that power and differentiate our infrastructure solutions and are critical in a cloud environment."
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