Enterprise, Mergers and Acquisitions, Mergers and Acquisitions

Hewlett Packard Enterprise: Piece of IT Services Up for Sale


Hewlett Packard Enterprise is the latest big IT company that's apparently trying to sell off a big IT services asset. In HPE's case, the company has put its 60 percent stake in Mphasis -- an India-based IT services company -- on the block for about $1 billion, The Times of India reported.

Meg Whitman
Meg Whitman

HPE inherited Mphasis as part of the nearly $14 billion buyout of EDS in 2008. That deal, like a number of HPE acquisitions, has underperformed the company's original expectations. In fiscal 4Q15, Enterprise Services revenue fell 9% YoY to $5.0 billion -- though operating profit for the group rose 9% YoY to $412 million, the highest since 2011, notes Market Realist.

Still, Mphasis reports its own financials -- and the company offered a positive spin to investors in an Oct. 20, 2015, earnings statement. At the time, Mphasis said it generated "Strong revenue growth in Direct International at 7.9% QoQ" while also boosting operating margin by 120 bps to 13.9%. Net profit grew 18.2% sequentially and margin improved 140 bps to 11.9%, the company added at the time.

Potential suitors for Mphasis include Tech Mahindra, Japan's NEC, L&T Infotech and private equity funds like Carlyle and Advent, according to The Times of India.

HPE: Focus, Focus, Focus

For HP Enterprise CEO Meg Whitman, the past few years have been about helping the company to simplify and focus, focus, focus on hybrid cloud opportunities.

As long-term enterprise projects like ERP give way to cloud-first initiatives across the globe, many big IT services arms have been losing their earnings muscle. In addition to HPE's challenges in the IT services market, IBM Global Services has faced revenue pressures in recent quarters, and Dell apparently is looking to sell Perot Systems.

The Dell move is part of a strategy to raise cash and strengthen the company's balance sheet ahead of Dell's $67 billion buyout of EMC and VMware, which is expected to close between May and October 2016.

Accenture, another IT consulting giant, has been in acquisition mode rather than spin-off mode -- buying up "cloud first" consulting companies that can assist enterprises and SMB customers with Google Apps, Salesforce, WorkDay, ServiceNow and other types of cloud deployments.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.