HPE sells "non-core" software assets to UK's Micro Focus

Hewlett Packard Enterprise (HPE) narrowed its focus even further yesterday, announcing during its Q3 earnings call that it will be selling off its Software Business Segment to UK business Micro Focus.

The segment, which includes big data, enterprise security, software delivery and test, and IT operations management, contributed to an 18% drop in revenue to $738 million for HPE's software division in the company's latest quarterly results, released yesterday.

Micro Focus's decision to buy the division makes it HPE's second major sell-off this year, after the company merged its enterprise serices unit with CSC in May. Prior to that, it sold its intrusion prevention division, Tipping Point, to Trend Micro for 195 million last October.

The latest transaction, valued at approximately $8.8 billion (6.6 billion), is the largest deal made by any UK company for some years and is expected to close in Q3 2017.

Calling the for-sale assets "non-core", HPE CEO Meg Whitman denied her company is getting out of software, instead saying it is repivoting to focus on software-defined technology.

"I want to be crystal clear HPE is not getting out of software," said Whitman. "Software is still a key enabler of our go-forward strategy, but we need the right assets to win in our target markets.

"Moving forward, we will double down on the software capabilities that power and differentiate our infrastructure solutions and are critical in a cloud environment."

She pointed to HPE's new software-defined and cloud businesses, saying it would use assets like IT management tool OneView and the Helion Cloud platform to deliver software-defined hybrid IT products such as its infrastructure platform Synergy.

Since OneView's launch in 2013, HPE has sold nearly 500,000 licenses, Whitman claimed, hailing a growing partner ecosystem including firms like Docker, Chef, Turbonomic and SaltStack. HPE also bought high-performance computing firm SGI over this summer.

"I am confident that we are making the right choices. Once the ES-CSC and Software-Micro Focus transactions are complete, HPE will be a faster-growing, higher-margin and stronger free cash flow company, well positioned for the future," she added.

Micro Focus said buying HPE Software aligns with other recent acquisitions of Serena Software and the Attachmate Group.

Kevin Loosemore, executive chairman of Micro Focus, said: "Today's announcement marks yet another significant milestone for Micro Focus and is wholly consistent with the long-term business strategy we have been pursuing to be the most disciplined global provider of infrastructure software.

"The combination of Micro Focus with HPE Software will give customers more choice as they seek to maximise the value of existing IT assets, leveraging their business logic and data along with next-generation technologies to innovate in new ways with the lowest possible risk."

The announcement followed HPE's financial results for its third fiscal quarter of 2016, reporting a 6% drop in revenue year-on-year to $12.2 billion. Its Enterprise Group revenue was $6.5 billion, down 8% year-on-year, while Enterprise Services revenue dropped 5% to $4.7 billion.