Mergers and Acquisitions, Enterprise

HPE Software Asset Sale: Judgment Day Approaching?

When Hewlett Packard Enterprise announces Q3 2016 fiscal results on Sept. 7, Wall Street investors and potential suitors will pay particularly close attention to HPE's software business -- which apparently is up for sale.

> Updated Sept. 7, 2016: HPE Confirms Software Spin-Off Plan.

Thoma Bravo, a private equity firm, reportedly is in talks to buy HPE's software business . The portfolio includes big data, analytics and management tools like Autonomy, Mercury Interactive and Vertica Systems. The private equity firm is widely respected in Silicon Valley. While some PE firms buy technology companies and strip out costs to boost valuation, Thoma Bravo is known for investing in the businesses it acquires. One example involves LANDesk, which has leveraged Thoma Bravo funding to acquire a range of assets.

Still, it's unclear how much HPE's software assets are worth -- and how much fixing they need. Hewlett Packard Co., the precursor to HPE, spent more than $15 billion acquiring those assets between 2006 and 2011. But the company's missteps along with write-offs have knocked the software business's value down to about $8 billion to $10 billion, reports have stated.

HPE Business Evolution

Meg Whitman
Meg Whitman

To Hewlett Packard Enterprise's credit, CEO Meg Whitman and the executive team have strengthened the company's overall revenue stream and profitability in recent quarters. But the software side of the house has remained a laggard. SaaS-related revenues have actually fallen in some recent quarters. That's a painful admission at a time when many rival SaaS companies enjoy strong double-digit growth.

When HPE announces its latest quarterly results on Sept. 7, the company will be under pressure to convince analysts and potential suitors that the software assets remain on strong financial footing.

It's unclear if or when HPE will ever comment on the alleged software sale negotiations.

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.