Hewlett Packard Enterprise Co. has inked a cooperation agreement with Elliott Investment Management that will avert the possibility of a proxy fight.

The company announced the deal today. 

Elliott is an activist investment firm that buys into companies and then promotes business changes designed to boost their stock price. Those changes sometimes include leadership reshuffles. Since 2022, more than a dozen chief executives have reportedly left companies in which Elliott bought shares.

The hedge fund purchased a $1.5 billion stake in HPE this past April following a disappointing first quarter report. The company topped revenue expectations, but told investors that “we could have executed better.” HPE stated that its server business’ profit margin had declined because hardware “pricing did not adequately account for the valuation of our inventory.”

One way activist investors seek to boost companies’ stock price is by launching a proxy fight. This is a shareholder vote designed to replace a company’s management team. Under the agreement, Elliott will refrain from launching a proxy fight for at least one year.

The investment firm plans to appoint technology executive Robert Calderoni to HPE’s board. He is currently the board chair of KLA Corp., a publicly-traded supplier of chipmaking equipment. 

Calderoni is set to lead a new strategy committee that will also include three other independent HPE directors. According to the company, the committee will “assess the strategies of HPE’s businesses and identify opportunities for additional value creation.”

Value creation is a term that often refers to cost cuts. Earlier this year, HPE launched a restructuring initiative that will see it cut 3,000 jobs over the next 12 to 18 months. The company estimates that the layoffs will reduce its operating expenses by $350 million per year starting in fiscal 2027.

Calderoni will also join the HPE board’s integration committee, which supervises the integration of Juniper Networks into its business. The company absorbed Juniper through a $14 billion acquisition that closed earlier this month. The U.S. Justice Department approved the deal after HPE agreed to spin off its Instant On WLAN unit, which makes Wi-Fi devices for businesses.

Calderoni’s participation in the integration committee hints that Juniper could become a focus of Elliott’s value creation initiative. The investment firm may push for layoffs or the sale of certain assets.

The cooperation agreement gives Elliott the option to appoint a second director to the HPE board. If it exercises the option, the one-year contract may be extended until the end of the the second director’s tenure. 

Photo: HPE