HP Enterprise to Merge IT Services Unit with Computer Sciences

HP is a well known name among all who know something about Technical Companies. Founded in 1939 and Headquartered in Palo Alto California, the brand offers all amazing stuff from the tech field. HP was founded by William Redington Hewlett & Dave Packard and since then is working in various Computer Hardware, Computer Software, IT Services and IT Consulting Service. HP was later divided into two companies known as HP Inc. and Hewlett Packard Enterprise. Shares of Hewlett Packard Enterprise after the split of these two companies rose 10.5%. HP offers several products like HP Laptops, HP mobile phones etc. and has many subsidiaries across all over the glob.

In recent days HP has announced to merge its all IT Related Services Business with Computer Sciences Corporation. This thing came into place due to the struggle of its IT units. HP now want to focus on Cloud Service business and other Fast Struggling Units to improve its market as well as revenue collection. Under the surveillance of Chief Executive Meg Whitman, HP now restructuring its IT Services. HP thinks that after this merging the firm will get an annual revenue of $33 billion. If this spinning and merging get success then HP can easily concentrate on its Cloud Services and other IT Services. This deal with Computer Sciences Creates and IT Service provider will be with $26 billion in annual revenue.

This merging will make HP a complete group of all its enterprises under one roof as it will merge around all the service enterprises of HP into one. Thus concentrating on the business will be easy and it will surely give a boost to HP. HP sold around 84% of its 60.5% shares in an Indian IT Company “Mphasis Ltd” to Blackstone Group for $1.1 billion. HPE which has the corporate hardware and services division announced that this will produce cost synergies of about $1 billion in one year. Computer Science Chief Executive Mike Lawrie will be the new CEO of this merged new company and 50% share will be owned by HPE share holders. Whitman will be a member in board of this new company. This merged company from HPE and CSC will have a new board of members which will be evenly split between directors nominated by HPE and CSC.

HPE’s Chief Financial Officer Tim Stonesifer announced that HPE expects $900 million in separation charges, of which $300 million will be recorded in 2016. Revenue of this enterprise group business rise 7% of its $7.01 billion in the second quarter on April 30, from the previous year, but revenue from the enterprise services business fell 2% on $4.7 billion from the past year. Thus enterprise services business fell 6% in the previous quarter. HPE added $3 billion to its share buyback too and said that total revenue rise 1.3% of $12.71 billion in second quarter, Said by Thomson Reuters. In this deal Goldman Sachs & Co is the financial adviser of HPE and RBC Capital Markets is financial adviser of CSC.

After this big deal remaining HP Enterprise Services will concentrate only on software, server systems, networking and storage hardware products. HP Enterprise has an estimate of the value of the services unit includes a 50% stake in the new company created along with Computer Sciences with around $4.5 billion value, and cash dividend of $1.5 billion with assumption by Computer Sciences of about $2.5 billion of liabilities.

HP has made this effort because it has a tough competition in cloud computing business from rivals like Amazon and Microsoft. Mr  Whitman said “We are creating two great companies that are going to be more focused on a narrower set of businesses,”. This statement shows the fact that now this joint effort of these two tech giants will definitely last up to a very long time.