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.
Private Equity Firms Reportedly Want to Buy HPE or Its Software Units
Both Dell and HPE are trying to navigate a rapidly changing business environment, where enterprises are increasingly running their workloads in cloud environments run by the likes of Amazon Web Services, Microsoft and Google rather than on servers in their own data centers. At the same time, those hyperscale cloud service providers are buying lower-cost systems in their massive data centers, and many of those systems are low-cost white-box servers built by original design manufacturers (ODMs) rather than top-tier system makers like Dell and HPE.
However, there are stark differences between how Dell and HP are pursuing their goals. Dell officials have steadfastly argued that the PC business is a critical part of their larger IT enterprise efforts, while HP split the company in two to help separate the enterprise IT and PC businesses. In addition, Dell is looking to grow larger, as evidenced by its $62 billion bid to buy data storage leader EMC.
However, Dell also is shedding businesses to help reduce the huge debt the company will take on once the EMC deal closes, a debt that could be as much as $50 billion. Dell officials last month said they were selling the company’s Software Group to private equity firms Francisco Partners and Elliott Management.
In March, Dell sold the services business it inherited when it bought Perot Systems for $3.9 billion in 2009. NTT Data bought Dell’s service business for $3.05 billion.
