Find Out Why Hewlett Packard Still Packs a Punch
Hewlett Packard Posts First Revenue Growth in 5 Years; Announces Spinoff of Its Enterprise Division
LONDON, UK / ACCESSWIRE / May 25, 2016 / ActiveWallSt.com post-earnings coverage of Hewlett Packard Enterprise (NYSE: HPE) following the company’s Q2 FY16 earnings result announcement on Tuesday, May 24, 2016. The enterprise solution provider reported adjusted earnings of $0.42 per share on revenue of $12.71 billion for the quarter ended on April 30, 2016. The company’s earning result met analyst’s expectation of $0.42 per share while beating revenue estimate by $380 million.
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Hewlett Packard stated that its net earnings rose by about 5% to US$320 million, or $0.18 per share, on a Y-o-Y basis. This is the first time Hewlett Packard’s revenue has grown on a y-o-y basis in the past five years. For Q2 FY16, Hewlett Packard returned $109 million to the shareholders as part of its dividend payment and stock repurchase programs. The board also authorized fresh buyback plan of $3 billion.
The company announced that it is expecting a slight increase in EPS for Q3 FY16 with non-GAAP EPS to be in the $0.42-$0.46, lower than analyst’s estimate of $0.48. For FY16, the company provided earning guidance of $1.85 to $1.95 per share as compared to analyst’s expectations of $1.88 a share.
Spinoff
Hewlett Packard announced plans for spin off and merger of its enterprise services business with Virginia based Computer Sciences Corporation (NYSE: CSC). Hewlett Packard shareholders will own around 50% of the new company. This structure, also known as a Reverse Morris Trust, would enable the deal to be tax free. Register for our free membership at:
The joint venture is expected to provide $8.5 billion to Hewlett Packard’s shareholders, including a $4.5 billion equity stake in the yet to be named company, dividend of $1.5 billion, and transfer of debt and other liabilities of around $2.5 billion from Hewlett Packard to the new entity. The merger is expected to be completed by March 2017, and once the deal is completed, it will provide saving of $1 billion in operating cost.
Increasing Focus
On Hewlett Packard’s earnings call, Whitman stated that the company has taken the decision to get leaner and focus on core areas in order to better compete with rivals such as Dell and EMC Corp. (NYSE: EMC), the two tech giants which are in the process of completing a planned $59 billion mega merger.
The spin-off of the enterprise division business, which was part of Enterprise Data System acquired in 2008 for $14 billion is in-line with a number of measures taken by the CEO to restructure the company and focus on its core business.
In November 2015, the company was split into Hewlett Packard from HP Inc. (NYSE: HPQ), the move separated its hardware business from the enterprise service division. The hardware business was part of the 2001 acquisition of computer maker, Compaq. In April 2016, the company announced selling 84% of its 60.5% stake in Mphasis Ltd, an IT service provider based in India, to Blackstone Group L. P. (NYSE: BX) for US$1.1 billion.
News of the deal sent Hewlett Packard shares soaring above 10% during afterhours trading on Tuesday, May 24, 2016 to $17.94, while Computer Sciences Corp.’s shares jumped 20% to $42. Get our complimentary technical alerts by clicking on the link below:
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