Many quotes of HPE’s CEO, Meg Whitman, explaining the state of HPE, 18 months after all the hijinks. Also, notes on some further cost reductions in the works: “We believe we can take out another $200 million to $300 million in cost in just the second half of this year.”
Stuart Lauchlan’s conclusion:
No-one can doubt the ambition in play here, a corporate reinvention on a massive scale that was never going to be entirely without bumps in the road.
See also his summary of the other half, HP.
In a brief write-up of HPE/Micro Focus from Paul Kunert:
Shareholders will also be asked to approve a $500m return of value, approximately $2.09 per share,” the statement to the City added.
Well, who doesn’t like money?
That said, performance is declining:
The [HPE Software?] business has shrunk in recent years, with turnover dropping from $4.06bn in fiscal 2012 ended 31 October to $3.19bn in fiscal 2016. Profit before tax during that period slipped too. In HPE’s Q1 ended January, sales in the software arm fell 8 per cent year-on-year to $721m.
All that M&A didn’t work out too well:
The software division at HPE is made up of a collection of separate units including Autonomy, Mercury Interactive, ArcSight, three businesses that alone cost HPE more than $16bn to acquire. Other elements include Vertica (buy price undisclosed) and relatively smaller IT management ops outfits.
For more context, see my notebook on the HPE/Micro Focus merger back in September, 2016.
Source: HPE dumps Grandpa Software in Micro Focus care home, hightails it
“We see PaaS as a strategic component of our software-defined infrastructure and application platform strategy,” stated SUSE President of Strategy, Alliances and Marketing Michael Miller, in a note to The New Stack, “and Cloud Foundry as the open source project and technology that brings together the best innovation and industry collaboration. We want to leverage that innovation for the benefit of our customers, and we have a vision for the convergence of CaaS technologies [in SUSE’s case, Containers as a service] like Docker and Kubernetes and PaaS technologies like Cloud Foundry that we think will address the real-world needs of our customers and partners. We will now work with the Cloud Foundry community to develop that vision.”
Some crisp HPE strategy coverage from Chris Evans at El Reg:
HPE is remaining part of the CSC and Micro Focus businesses by having a shareholding in the new organisations. It’s fascinating to think what this might mean going forward. It’s like neither business wants to fully commit to where future revenue for their business may lie. I say this because I can only assume that infrastructure sales will become a dwindling business as companies move to public cloud; it doesn’t seem to be enough that infrastructure alone will keep businesses buying on-site solutions.
And, a nice summing up of the HP master plan:
Effectively Meg Whitman is unravelling some of the bad decisions of the last few years, including the purchase of Autonomy and acquisition of EDS in 2008. There’s more focus on delivering infrastructure to clients, rather than moving revenue to services – remember HPE’s public cloud offering was also culled at the beginning of 2016.
While HPE is getting $2.5bn in cash, the whole deal value is more like $8.8bn, the non-cash being stock. More details:
- “Under the deal, HP Enterprise shareholders are expected to end up with Micro Focus shares currently valued at about $6.3 billion. Micro Focus will pay HP Enterprise $2.5 billion in cash.” (WSJ)
- There’s about 12,000 people in HPE Software. (WSJ)
- HPE Software revenue: “HPE’s software unit generated $3.6 billion in net revenue in 2015, down from $3.9 billion in 2014.”
- Put another way, from TBR: “2Q16 software revenue [had a] decline of 18% year-to-year, driven down by a license revenue decline of 28% year-to-year.”
- HPE has been divesting a lot, getting a hoard of cash: “In earlier transactions, HP Enterprise in May completed a $2.3 billion deal in China to sell a 51% stake in a venture there called H3C that sells networking, server and storage hardware and related services. Later the same month, HP Enterprise announced a deal to spin off a computer services business that employs about 100,000 people—two-thirds of the company’s total head count—and merge it with operations of Computer Sciences Corp.”
- Also: “The company sold at least 84 percent of its 60.5 percent stake in Indian IT services provider Mphasis Ltd to Blackstone Group for $1.1 billion in April.”
What now for HPE?
Continue reading HPE Software sold for $8.8bn, to Micro Focus
But expanding the cult was always SGI’s problem. Like a fringe political party, the company had ardent supporters, but outsiders were hesitant to adopt the minority platform, even if they agreed with many of its fundamental tenets.
Source: Seven Years Later, SGI Finds a New Ending
One former Mercury man’s write-up of what went wrong with the high-flying tech company once it was acquired:
In the case of HP and Mercury, the slow-down was particularly unfortunate because the acquisition came just as enterprise application development was moving from proprietary protocols and GUIs to web applications talking HTTP. Mercury’s powerful and extremely customisable products were arguably overkill for simple web applications, and a new generation of tools was beginning to emerge that was dedicated for that purpose. Given its singular focus on testing, and based on what I know of the company culture pre-acquisition, I am quite certain that an independent Mercury would have addressed the challenge head on and remade itself for that new world. After all, Mercury was fully aware of web applications, offering services that would simulate user access from locations around the world to have a continuous view on sites’ performance as experienced around the world.
Continue reading Mercury’s decline in HPE
Rumors are HPE is looking to sell of some older software assets, Autonomy, Mercury, and Vertical. Acquisition prices from Bloomberg:
- Autonomy: $10.3bn in 2011
- Mercury: $4.5bn in 2006
- Vertica: ~$350m in 2011
It’s that bugbear cloud, James over at RedMonk, said back in June in his report on the company’s big conference:
Make no mistake – Cloud is a forcing factor for pretty much all of the issues facing incumbent enterprise suppliers today. Cloud is putting pressure on all enterprise software markets – applications, hardware, networking, security, services, software, storage etc.
That said, I’d theorize that these are all reliable businesses with reliable customer bases. Their revenue may be declining and they may not be all “SaaS-y,” but for the right price PE firms could probably do alright.
Continue reading Mature Software Is Hard: HPE Looking to Divest?
HP strategy is focusing on just large accounts, letting partners sell to smaller folks. Makes sense.
HP Enterprise To Sell Exclusively Through Channel Outside The Fortune 500