Following weeks of rumors, Hewlett-Packard Enterprise has spun off some of its software assets to Micro Focus in a deal valued at $8.8 billion. Under its terms, Micro Focus will pay HPE $2.5 billion in cash and HPE shareholders will receive 50.1 percent of the new company's stock.
Here are the details from HPE's announcement:
The combination of these software assets -- which includes HPE's Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses -- and Micro Focus' highly complementary portfolio will create one of the world's largest pure-play software companies.
The new company will have the global footprint, agility and financial strength to drive software innovation across a comprehensive array of products. At the same time, the move enables a standalone HPE to realize its vision of being the industry's leading provider of hybrid IT, built on the secure, next-generation, software-defined infrastructure that will run customers' data centers today, bridge them to multi-cloud environments tomorrow, and enable the emerging intelligent edge that will power campus, branch and IoT applications for decades to come.
Micro Focus will become a company with about $4.5 billion in annual revenues after the deal closes. Among the assets it will gain is Autonomy, the information management vendor Hewlett-Packard acquired in 2011 under the leadership of CEO Leo Apotheker for $11 billion. HP infamously took an $8.8 billion writedown on the deal after an accounting controversy.
The combination of the software assets HPE is spinning off along with Micro Focus's own extensive portfolio will create an eclectic array of infrastructure products that at first seem to lack immediate cohesion. Micro Focus is best known for its COBOL and mainframe development tools but in recent years has spent nearly $2 billion to buy Attachmate and Serena Software, broadening its footprint into file transfer, application integration, system management and enterprise Linux through SUSE.
Overall the deal looks like a mixed bag, depending on where you sit, says Constellation Research VP and principal analyst Holger Mueller.
"Micro Focus gets a proven set of products and a lot of ongoing business, and HPE can focus completely on the software-defined data center," he says. But for HP customers who bought into the larger HP vision prior to the company's initial split and subsequent divestitures, life may be more complex as they now have to deal with more vendors than before.
The big question for HP customers affected by the spinoff will be the amount of innovation Micro Focus is able to put into the acquired products, as well as potential changes to account management, sales relationships, pricing and support.
If there is a sweet spot for Micro Focus, it "would seem to be mainly around the application delivery management—former Mercury Interactive—aspects of the HPE Software portfolio," says Constellation Research VP and principal analyst Doug Henschen. "I think customers of Vertica and Autonomy should take a cautious view of this deal and pay close attention to what Micro Focus has to say about plans for future investment in these products."
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