HPE Reportedly Considering Selling Software Units

By Jeffrey Burt  |  Posted 2016-07-11 Print this article Print

The company is in the early stages of a plan that could result in such units as Autonomy, Vertica and Mercury Interactive being sold, a report says.

Hewlett Packard Enterprise officials reportedly are considering selling software assets like Autonomy and Vertica Systems as they look to streamline the company to meet changing customer demands brought on by such trends as the cloud, the proliferation of mobile devices and the Internet of things.

According to a Bloomberg report citing unnamed sources, company executives are in the preliminary stages of the sales process and that the effort may not result in any deals. Under consideration are businesses that have grown within HPE through acquisitions over the past several years, including Autonomy, Vertica and Mercury Interactive.

HPE spokespeople have declined to comment on the report.

A sale of the company's software assets would continue a reorganization of the company since Hewlett-Packard split in two in November 2015. The breakup of the tech giant created two new companies: Hewlett Packard Enterprise (HPE), which sells enterprise IT solutions, and HP Inc., which deals in PCs and printers. CEO Meg Whitman said that separating the enterprise and PC businesses would enable each to grow more quickly in their highly competitive markets. In addition, it also allowed the enterprise business to distance itself from the contracting global PC market, which has seen shipments drop consistently over the past four years.

More recently, HPE officials in May announced they were spinning out the company's enterprise services business as a separate entity and merge it with Computer Science Corp. (CSC). The move would be an $8.5 billion boon to HPE, according to the company. The goal of the deal—which is expected to be completed by March 2017—is to enable HPE to keep its hand in services but reduce the business costs associated with it. HPE shareholders will own stakes in both HPE and the combined services company.

If the reports are accurate, HPE wouldn't be the only tech vendor looking at selling its software businesses as a way to bolster its financial picture and give it more flexibility. Dell, which is in the process of buying data storage vendor EMC and its associated federated businesses—including VMware—for more than $60 billion, in June announced it was selling its Software Group to private equity firms Francisco Partners and Elliott Management in a deal rumored to be around $2 billion. The group includes the SonicWall and Quest Software units.

Dell will be getting software assets as part of the EMC deal, and the company is looking to reduce a debt burden after the acquisition closes that could be as high as $50 billion. Dell earlier this year sold its services unit to NTT Data for $3.05 billion.

HPE in its most recent quarterly report said that during that time, it saw revenue drop 13 percent over the same period the year before, though operating margins improved.

HP bought Autonomy in 2011 for about $11 billion in a highly controversial deal that resulted in lawsuits and countersuits with the enterprise software maker's former executives over accounting practices at Autonomy in the time leading up to the acquisition. Vertica was bought that same year for its data analytics software. HP spent $4.5 billion in 2006 for Mercury Interactive, which brought with it tools for measuring the performance of customers software.

The Autonomy and Vertica acquisitions during Leo Apotheker's 11-month tenure as HP CEO came as part of his effort to shift the company's focus from hardware to software. A year later, HP was forced to pay $8.8 billion in charges due in large part to questions around Autonomy's accounting practices before the deal, which led to a flurry of lawsuits between HP, Autonomy and HP investors.

Before all that happened, Apotheker had been forced to resign and was replaced by Whitman, who was on HP's board of directors at the time of the Autonomy acquisition.



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