HP Enterprise Seeks $10 Billion for its Software Operations (HPE)

Source of the news: http://www.investopedia.com/news/hp-enterprise-seeks-10-billion-its-software-operations-hpe/

Hewlett Packard Enterprise Co. (HPE) is reportedly seeking a buyer for its software operations in a deal that could be worth upwards of $10 billion. The announcement follows a larger company initiative to continue narrowing its business focus. Reuters reports HP Enterprise is in talks with buyout firm Thoma Bravo LLC. to sell its software division, hoping to score an offer between $8 to $10 billion.

HPE Sheds Software Operations to Focus on Core Businesses

Hewlett Packard Enterprise is the successor of Hewlett Packard, resulting from its separation from newly formed HP Inc. (HPQ). (See also: What Will HP’s Split Do to Its Stock?) Last year, the company listed under its own ticker, sold its Enterprise group to a competitor, and began to focus solely on networking, storage, data centers and related technology services. (See also: HPE Beats Q1 Earnings, Rev; Announces Spinoff.) Negotiations led by HPE CEO, Meg Whitman, therefore will propel this initiative forward, shedding layers of the business not in line with the company’s core divisions.

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HPE’s software assets include big data analytics platform Vertica and cyber-security firm ArcSight. The sale of HP Enterprise’s software arm would likely end the company’s operations with British software maker Autonomy Corp. HPE bought the company in an ill-fated acquisition for $10.3 billion in 2011. The selloff will also include assets acquired in HPE’s 2006, $4.5 billion acquisition of Mercury Interactive.

Thoma Bravo Among Firms Making Offers

Sources report HPE has received offers up to $7.5 billion, below its preferred price range, in a sales process managed by investment bank Goldman Sachs Group Inc. (GS). While the biggest offer for HPE’s software arm has reportedly come from Thoma Bravo, no deal is certain amid “significant discrepancies in valuation expectations.” Other private equity firms noted to have made offers include Vista Equity Partners, Carlyle Group, and TPG Capital.

HP isn’t the only tech company seeking to slim down noncore operations and software assets. In June, Dell Inc., sold its software assets to buyout firm Francisco Partners and hedge fund Elliot Management Corp. for more than $2 billion.

HPE’s software unit generated $3.6 billion in net revenue for 2015, down from $3.9 billion the year prior. The company has explained weakened revenue growth to a market shift towards cloud subscription offerings. HPE shares jumped about 4% in light of news regarding the selloff. HPE is now trading at $22.17 per share with a market capitalization of $38.03 billion as of September 2.

About Calsoft

Calsoft is a leading software product engineering services company specializing in Storage, Networking, Virtualization and Cloud business verticals. Calsoft provides End-to-End Product Development, Quality Assurance Sustenance, Solution Engineering and Professional Services expertise to assist customers in achieving their product development and business goals. www.calsoftinc.com

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