Khaleej Times

HP Enterprise plans $8.5b spinoff

- Brandon Bailey

san francisco — Hewlett Packard Enterprise is continuing to slim down by selling its business services division to competitor Computer Sciences Corp.

Both companies said the deal is worth about $8.5 billion to shareholde­rs in HP Enterprise, one of two companies formed last year by the breakup of struggling tech giant Hewlett-Packard, Inc.

HP Enterprise, based in Palo Alto, California, will now concentrat­e on selling data centre hardware, software and other commercial tech gear to big organisati­ons. It’s spinning off a technology outsourcin­g and management services business that includes operations the old HP acquired when it bought Electronic Data Systems Inc., for nearly $14 billion in 2008.

CEO Meg Whitman said the “enterprise services” division helped bring in customers. With roughly 100,000 employees, it contribute­s more than a third of HPE’s revenue. But the division has lagged

HP Enterprise will now concentrat­e on selling data centre hardware, software and other commercial tech gear to big organisati­ons.

other segments in both growth and profit. Analysts say some of the operations acquired from EDS were outdated.

Whitman announced the deal Tuesday as HP Enterprise reported better-than-expected revenue for its fiscal quarter ended April 30.

Investors liked the news: HP Enterprise stock rose more than 10 per cent in after-hours trading after the deal was announced. Shares in CSC — AP surged more than 27 per cent. Whitman has been trying to overhaul a once-mighty tech conglomera­te since she became chief executive of the old HP in 2011. Nearly a decade ago, the old HP led the tech industry with annual sales above $100 billion, boosted by several large acquisitio­ns including EDS and the personal-computer maker Compaq.

But the company struggled to rise in HP Enterprise stocks after the deal was announced keep up with industry trends, as consumers bought fewer PCs and businesses shifted to new models of commercial computing. Whitman oversaw a split last year that led to the creation of HP Enterprise and a second company, HP, that’s focused on selling PCs and printers.

Spinning off the services division will leave HPE with businesses producing about $33 billion in annual revenue, the company said Tuesday. It said the deal should boost annual revenue for Tysons, Virginia-based CSC to about $26 billion. HPE shareholde­rs will get a cash dividend of $1.5 billion and a 50 per cent stake in CSC, which will assume about $2.5 billion in debt and other liabilitie­s. — AP

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