Private Equity Firms Reportedly Want to Buy HPE or Its Software Units

By Jeffrey Burt  |  Posted 2016-07-30 Print this article Print
tech business

Such deals would be the latest steps in a restructuring at the company that accelerated when HP broke in two last year to create HPE and HP Inc.

The ground underneath Hewlett Packard Enterprise continues to shift.

According to separate reports citing unnamed sources, private equity groups are either interested in buying some software assets, including its Autonomy and Vertica, that HPE is said to be considering shedding or they are looking to buy the giant tech vendor outright for about $40 billion and taking it private.

Either direction would continue a significant restructuring the company has undergone since Hewlett-Packard split in two in November 2015, creating enterprise IT solutions provider HPE and HP Inc., which sells PCs and printers.

Since then, the company has spun out its IT services arm and sold off most of its stake in a subsidiary in India, and continues to remake its workforce structures.

HPE officials have declined to comment on the newest reports.

According to a report from Reuters, unnamed buyout firms are determining whether to buy some of HPE's software businesses, which could be sold in the $6 billion to $8 billion range. Reports earlier this month indicated that HPE executives were in the preliminary stages of the process to sell such software units that the company has bought over the past several years, including Autonomy, Vertica and Mercury Interactive.

Most interesting is the Autonomy business. HP bought the enterprise software company in 2011 for about $11 billion in a highly controversial deal. What followed were lawsuits and countersuits with the 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.

The Autonomy and Vertica acquisitions were made during Leo Apotheker's 11-month term as HP CEO 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 to the issues around Autonomy's accounting practices before the deal.

In another report, the news site The Information said that private equity firms—including KKR, Apollo Global Management and the Carlyle Group, are looking at buying HPE, with the price coming in at more than $40 billion. The new site cited an unnamed source "who has had talks with representatives of the firm."

According to the source, such a buyout would enable HPE—which is looking to revamp its IT solutions businesses, including servers, storage and networking—to continue its restructuring as a private company away from constant attention from Wall Street analysts.

It's the same desire that fueled Michael Dell's decision almost three years ago to partner with Silver Lake Partners to buy his namesake company for about $25 billion and take it private. Since returning as CEO in 2007, Michael Dell has overseen the transformation of his company from a PC maker to a more complete enterprise IT solutions and services provider that can compete with the likes of IBM, HPE and Cisco Systems.

Michael Dell had argued that doing so under the scrutiny that comes with being a public company was difficult because the tech vendor had to report its financial numbers every three months—what he called a 90-day shot clock—and had to answer to shareholders. Now company executives can think more long term when deciding on the direction of the company.



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