HP Enterprise to merge IT services unit with Computer Sciences

Wed May 25, 2016 5:02am EDT
 
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(Reuters) - Hewlett Packard Enterprise Co said it would spin off and merge its struggling IT services business with Computer Sciences Corp, allowing the company to focus on its cloud services business and other fast-growing units.

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.   Continued...

 
Signs for Hewlett Packard Enterprise Co. cover the facade of the New York Stock Exchange November 2, 2015. REUTERS/Brendan McDermid