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Hewlett-Packard sells software division to Micro Focus

In a deal worth $8.8bn, Hewlett-Packard has sold its enterprise software division as the company continues to downsize

Hewlett-Packard's sale of its enterprise software division to Micro Focus is part an ongoing downsizing effort intended to focus the company on its core business of computers and printers

Hewlett-Packard has unloaded a division of its software business to UK firm Micro Focus for $8.8bn as the Silicon Valley giant continues to streamline and downsize. The deal is a victory for Micro Focus, and will create one of the largest software companies in the UK by revenue The Guardian reported.

Hewlett-Packard Enterprise (HPE), a division of HP created last year to split the company’s hardware and software divisions, is parting ways with its non-core software assets as part of the sale. HP’s Chief Executive, Meg Whitman, is instead focussing the company on its strength in the computer and printer markets. HPE also recently sold its business services division to long-time competitor CSC for $8.5bn, and HP as a whole has slashed several thousand jobs over the last few years.

Hewlett-Packard Enterprise is parting ways with its non-core software assets as part of the sale to Micro Focus

As part of the terms of the terms of the deal, HPE shareholders will be awarded 50.1 percent of the new combined company. Micro Focus is paying $2.5bn in cash as part of the purchase.

Significantly the sale includes what is left of Autonomy, a bungled acquisition made by HP in 2011. HP made the purchase of the UK-based software house for $11bn, but was forced to write off billions from the vale of the company soon after. HP alleged this was due to deceptive accounting practices by Autonomy, intended to inflate the company’s value prior to the purchase. Autonomy’s management strongly denied the allegations, with a legal battle still ongoing.

Micro Focus is a software house that provides legacy support to large companies looking to connect old and new software systems – often a cheaper option than a full replacement. It has been on an acquisition spree for the last few years, purchasing Attachmate for $1.2bn in 2014 and Serena Software earlier this year for $540m. It has also enjoyed a surging share price and recently joined the ranks of the FTSE 100.

“The combination will give customers more choice as they seek to maximise the value of existing IT assets, leveraging their business logic and data along with next-generation technologies to innovate in new ways with the lowest possible risk”, said Kevin Loosemore, Executive Chairman of Micro Focus.