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Hewlett Packard Enterprise to streamline operations, split off IT Services business

Throughout the last few months, we’ve been closely following HP. Along with bringing you the news on several new HP products, we most recently we reported on the fact that a tough market has hit HP’s PC revenue. Today, we can report that HP has announced plans for a tax-free spin-off and merger of its Enterprise Services business with CSC, which will create a pure-play global IT services powerhouse.

This spin-off and merger marks a turnaround of HPE’s Enterprise Services segment. It also allows a standalone HPE to further sharpen its leadership in building the vital end-to-end infrastructure solutions necessary to power the enterprise cloud and mobility revolutions. Mike Lawrie, CSC chairman, president, and Chief Executive Officer believes that the new company will help clients succeed. He says in the HPE Press release,

As a more powerful, versatile and independent global technology services business, this new company will be well positioned to help clients succeed on their digital transformation journeys,” said Mike Lawrie, CSC chairman, president and chief executive officer… Together, CSC and HPE’s Enterprise Services will have the scale, foundation and next-generation technologies to innovate, compete and grow in a rapidly changing marketplace. We are excited by the great potential this merger brings to our people, clients, partners and investors, and by the opportunity to strengthen our relationship with Hewlett Packard Enterprise.

Overall, though, the merger of the two businesses expected to produce first-year cost synergies of approximately $1 billion post-close, with a run rate of $1.5 billion by the end of year one. Agreements between HPE and the new company will also maintain focus on serving current customers and growing new business opportunities over time.

In terms of stock, HPE shareholders will own approximately 50 percent of the new combined company. Lastly, Mike Lawrie is to become chairman, President, and CEO of the new company, and Mike Nefkens will join new company’s executive team.  Meg Whitman, meanwhile, will join the board, which will  be split 50/50 between directors nominated by HPE and CSC. HPE’s extended Q2 earnings call is set to happen at 4:30 p.m. ET today and will elaborate on the transaction.

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