HPE IT services merger with CSC is ‘right step’ for customers

Hewlett Packard Enterprise (HPE) is spinning off its IT services business into Virginia-based IT company CSC. The move follows the recent decision by rival Dell to also sell off its IT services business ahead of its acquisition of EMC.

The HPE move is the latest in a string of adjustments designed to boost HPE’s service unit and it is claimed the the new “pure play” IT services company will be worth $26 billion (£18bn) when the deal is completed by 31 March next year.

“The ‘spin-merger’ of HPE’s Enterprise Services unit with CSC is the right next step for HPE and our customers,” said HPE CEO Meg Whitman, who said the offload will help HPE refocus its efforts in the cloud and mobility space.

“Enterprise Services’ customers will benefit from a stronger, more versatile services business, better able to innovate and adapt to an ever-changing technology landscape.”

HP Enterprise ‘Stronger’

HPE will keep a 50 percent stake in the new company, receiving a tax free $1.5 billion cash dividend from CSC. HPE will also transfer $2.5 billion (£1.7bn) in debt.

As for HPE customers, nothing should change, said HPE. CSC boss Mike Lawrie said that his own company will become more powerful and versatile, and “well positioned to help clients succeed on their digital transformation journeys”.

“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,” he said.

At the same time as the spin-off, HPE reported second quarter revenue of $12.7 billion, up one percent from the same quarter one year ago. The quarter marked HPE’s first revenue growth in five years.

CSC recently completed the acquisition of Xchanging. At the same time of the HPE announcement, CSC posted its full year results, which saw a 12.5 percent decline in sales.