Computer Sciences Corp will absorb a big division from HP Enterprise
Hewlett Packard Enterprise Co plans to merge its unsuccessful IT services division with Computer Sciences Corp, making room the firm to concentrate on other parts of the business that are performing.
25 May 2016 – Reuters
Shares of Hewlett Packard Enterprise, formed after Hewlett-Packard Co formally split in November, rose 10.5 percent in extended trading on Tuesday.
Falls Church, Virginia-based Computer Sciences’ shares jumped 19.5 percent to $42.60.
Under Chief Executive Meg Whitman, Hewlett Packard Enterprise has been restructuring its IT consulting and services group.
The company sold at least 84 percent of its 60.5 percent stake in Indian IT services provider Mphasis Ltd to Blackstone Group for $1.1 billion in April.
HPE is expected to have $33 billion in annual revenue after the spinoff and will concentrate on its remaining enterprise group that includes its cloud services business and makes servers, routers and switches.
Revenue from the enterprise group business rose about 7 percent to $7.01 billion in the second quarter ended April 30, from a year earlier, on a constant currency basis.
However, revenue from the enterprise services business, which the transaction values at about $8.5 billion after tax, fell 2 percent at $4.7 billion year-over-year.
The enterprise services business fell 6 percent year-over-year in the previous quarter.
HPE, which houses the former Hewlett-Packard Co’s corporate hardware and services division, said the merger of the two businesses is expected to produce cost synergies of about $1 billion in the first year after close, expected by March 2017.
Computer Sciences Chief Executive Mike Lawrie will become chairman, president and CEO of the new company, 50 percent of which will be owned by HPE shareholders. Whitman will join the board of the new company.
The new company’s board will be split evenly between directors nominated by HPE and CSC.