HPE Sells Non-Core Software Assets in $8.8 Billion Deal

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in May-June 2016.**

Less than one week ago, rumors swirled about Hewlett Packard Enterprise (HPE) selling off its software unit; today it’s no longer a rumor.

HPE on Wednesday announced the spinoff and merger of non-core software assets in an $8.8 billion deal with Micro Focus, in which HPE retains 51 percent ownership of the new combined company that’s currently valued at $6.3 billion. (This follows on the heels of another HPE spinoff and merger deal – HPE Enterprise Services Business with Computer Sciences Corp. – in May.)

More specifically, the software assets in this deal include: HPE’s Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses. Together, HPE and Micro Focus, with a highly complementary portfolio, are positioned to form one of the largest pure-play software companies, according to HPE.

“We believe that the software assets that will be a part of this combination will bring better value to both our customers and shareholders as part of a more focused software company committed to growing these businesses on a stand-alone basis,” said Meg Whitman, president and CEO of HPE.{ad}

The new company is expected to have annual revenue of about $4.5 billion with strong recurring revenue streams, and be diversified across product lines and geographies, Whitman added, also noting that she expects that big data and analytics will be key areas of focus for growth.

Executives in leadership for the combined company will include Kevin Loosemore, executive chairman of Micro Focus, and Mike Phillips as chief financial officer. Robert Youngjohns, currently in charge of HPE’s software business, will become executive vice president of strategic business development and report to Whitman.

Longjohns will be responsible for partnering with the leadership team to drive strategic customer and partner initiatives focused on growing key parts of the business. Current HPE chief operating officer, Chris Hsu, will replace Youngjohns in the software business immediately, in addition to his current responsibilities.

HPE and Micro Focus also announced plans for a commercial partnership that will name SUSE as HPE’s preferred Linux partner and will bring together HPE’s Helion OpenStack and Stakato solutions with SUSE’s OpenSack expertise, according to the company.

Keeping in line with Whitman’s strategic business focus in areas such as networking, storage and technology services, the CEO noted that software and services are still key enablers of HPE’s go-forward strategy.

“Our newly created software-defined and cloud business will build upon key software assets like OneView and the Helion cloud platform to deliver software-defined and hybrid IT solutions like Synergy, HPE’s composable infrastructure,” she said. “In services, we continue to have a world-class capability in our Technology Services Group,” Whitman added.

The deal is expected to close by the second half of HPE’s fiscal year 2017.

Also today, in its Q3 FY 2016 earnings report, HPE reported revenue of $12.2 billion.