HPE Third Quarter Earnings OverShadowed by Software Sell-Off

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Hewlett Packard Enterprise (HPE) is set to shed what it considers its non-core software assets in a deal valued at approximately $8.8 billion. With the non-core assets gone, HPE will still retain its OpenStack cloud business and will double down on hardware.

HPE announced the so-called ‘spin-merge’ of its software assets to Micro Focus ahead of HPE’s third quarter earnings call on September 7. For the quarter, HPE reported revenue of $12.2 billion for a six percent decline, year-over-year. Net Earnings were reported at $2.3 billion up significantly from the $200 million reported for the third quarter of 2015.

“Last November, we launched the new Hewlett Packard Enterprise with the vision to become the industry’ leading provider of hybrid IT with the secure next generation software defined infrastructure,” Meg Whitman, CEO of HPE said during her company’s earnings call.

Whitman noted that HPE has identified areas of the business that were not aligned with its go forward strategy. Among those areas are a long list of what HPE now considers to be non-core software assets.

“These assets include our application delivery management, big data, enterprise security, information management and governance and IT operations management businesses,” Whitman said.

Looking at the specific product and brands that HPE is selling: In the application deliver managment space, HPE is spinning out ALM and AppPulse; in Big Data, IDOL, Vertica and HEP Haven are all going; in the enterprise security space, Fortify, ArcSight, Atalla and Voltage Security are all leaving too. The spin-merge to Micro Focus will leave HPE with a 50.1 percent ownership of the new combined company.The combined company will be led by Kevin Loosemore, current Micro Focus Executive Chairman.

Though HPE is shedding much of its software assets, Whitman emphasized that it isn’t abandoning the software market altogether.

“To be clear both software and services are still key enablers of HPE’s go forward strategy,” Whitman said. “Our newly created software defined and cloud business will build upon key software assets like OneView and the Helion Cloud platform to deliver software defined hybrid IT solutions like synergy.”

The OneView platform first debuted in September 2013 as a management platform for converged systems. Whitman noted that to date, HPE has sold over 500,000 HPE OneView licenses across a variety of key verticals.

During the earnings call, Whitman was asked why HPE is shedding business, while rivals like Dell are adding more.

“In today’s world where technology is changing at lightning speed I’ve got to tell you the value of focus, I am seeing it every single day,” Whitman said. “So while back in the day it was great to be a technology supermarket, what I am pretty sure of is the next four or five years is going to be all about speed, agility, focus and innovation.”

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com. Follow him on Twitter @TechJournalist