UPDATED 14:49 EDT / SEPTEMBER 01 2017

APPS

HPE wraps up its $8.8B software spinoff to Micro Focus

Hewlett Packard Enterprise Co. is a much leaner company than it was yesterday.

The technology giant this morning officially wrapped up the sale of its former software business to U.K.-based Micro Focus International plc. As part of the deal, HPE has received an $2.5 billion cash payment while its shareholders will own a 50.1 percent stake in the British company. The total value of the transaction adds up to about $8.8 billion.

HPE will still prioritize software in the wake of the sale, but with a much narrower roadmap. The company intends to concentrate on its core focus areas of data center infrastructure, hybrid clouds and edge computing.

The assets that fell outside this vision are now part of Micro Focus. Among them is the software portfolio that HPE’s predecessor company, Hewlett-Packard Co., obtained through the controversial acquisition of Autonomy Corp. plc in 2011. HP had to write off most of the $11.1 billion deal’s value shortly after its completion due to accounting irregularities blamed on Autonomy’s leadership.

Besides the Autonomy assets, HPE has also offloaded the widely used ArcSight security platform and the Mercury Interactive application management unit. The deal saw the company spin off these assets into a standalone entity that then merged with Micro Focus, a move intended to allow for a tax-free transfer.

Micro Focus, however, may still be on the hook. Bloomberg reports that the transaction is “likely” to trigger tax inversion penalties under regulations passed last year.

Nonetheless, Micro Focus executive chairman Kevin Loosemore sounded an optimistic tone in an interview with the publication. He dismissed the tax concerns and highlighted that the company’s increased size will enable it to make bigger acquisitions. Micro Focus is now the largest tech firm in the U.K. with over 18,000 employees.

“We wanted to create a pure-play software company,” recently appointed Micro Focus Chief Executive Officer Chris Hsu said in an interview with SiliconANGLE. He came aboard earlier this year from HPE, where had served as chief operating officer.

Hsu said Micro Focus’ core code, used for mission-critical job such as credit-card processing, can serve as an onramp for large enterprises looking to move more workloads to the cloud while maintaining operations that can’t be moved from corporate data centers because of security or regulatory or governance rules.

“This is a platform that’s never going away,” he said. “We are uniquely positioned to help companies navigate the hybrid IT [information technology] environment.”

Hsu added that Micro Focus will do acquisitions to help it remain relevant in the new world of software that’s bound to continue consolidating, “but you won’t see us pay ridiculous prices.”

In its last quarter, before the acquisition, Micro Focus reported revenue of about $1.38 billion, up 11 percent from a year earlier. But not counting acquisitions, revenue fell about 1 percent. Pretax profit rose a fraction, to $196.3 million.

With reporting from Robert Hof

Image: SiliconANGLE

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