HPE Spins Software Unit to Focus on Infrastructure
As at least one competitor gets bigger, Hewlett-Packard Enterprise (HPE) got smaller this week with an $8.8 billion spinoff and merger of its software unit with staid software vendor Micro Focus.
HPE (NYSE: HPE) and Micro Focus (LSE: MCRO.L) also announced plans this week to form a partnership that will name the U.K.-based vendor's SUSE unit as HPE’s preferred Linux partner. The move combines HPE’s Helion OpenStack and Stackato platforms with SUSE’s OpenStack distribution.
HPE's "non-core" software assets involved in the deal include its application delivery management, big data, enterprise security as well as information management and governance platforms. In shedding those assets, HPE said it would sharpen its focus on providing hybrid IT infrastructure for running datacenters while bridging them to multi-cloud environments.
The deal also provides HPE with "dry powder" in the form of more than $5 billion in net cash it expects to use for other deals as competition stiffens in the hybrid IT infrastructure market. The competitive landscape shifted again earlier in the week when Dell and EMC Corp. closed their merger deal to create privately held Dell Technologies.
Meanwhile, the combination of HPE's software assets with Micro Focus is expected to create a $4.5 billion pure-play software infrastructure vendor. "The combination of Micro Focus with HPE Software will give customers more choice as they seek to maximize the value of existing IT asset," noted Kevin Loosemore, executive chairman of Micro Focus, who will head the new company.
The software merger also formalizes collaboration between HPE and SUSE. Along with OpenStack, SUSE CEO Nils Brauckmann said the partners would "explore new ways of expanding upon that with a commercial partnership focused on areas such as cloud computing, software-defined networking and application platforms."
Responding to questions about the spinoff and merger, HPE CEO Meg Whitman called Micro Focus a "pure play software company who is expert at managing mature software assets. And as Micro Focus will tell you, most people who work in the software business and Silicon Valley want to grow assets. And actually some of these assets should actually be maintained on a stable platform that extends the value for customers and it’s actually not what we do, it is what they do."
Despite the move, Whitman said HPE remains in the software business with a tighter focus on system software. "The software defined infrastructure is all powered by software, but it's not applications software…. It is actually system software that powers the infrastructure."
As assets like Vertica Systems analytic database management software shift to Micro Focus, Whitman said HPE would still "pick up the ability to process on compute, storage and networking at the edge."
The HPE chief also argued that shedding its software business puts it in a better position to compete with new industry juggernaut Dell Technologies and Cisco Systems (NASDAQ: CSCO). While Dell is getting much bigger with the completion of its mergers with storage leader EMC, Whitman acknowledged, "We are getting smaller" because "speed and agility [are] critical in innovation."
"We’re leaning into new technology either through our own innovation, acquisitions or partnerships," Whitman asserted. Dell Technologies, on the other hand, "is doubling down in old technology."