Hewlett Packard: About Face
September 7, 2016
I read “Exclusive: HP Enterprise in Talks to Sell Software Unit to Thoma Bravo – Sources.” Who does not love a news story labeled “exclusive” and attributed to “sources” when the subject is Hewlett Packard Enterprise? The thrust of the story is that HPE, fresh from making marketing noises about its enterprise software business, is allegedly selling those software businesses.
Let’s assume that this is indeed accurate. The asking price is is in the neighborhood of $8 to $10 billion or more if the excited buyer really wants this collection of software.
Why is HPE selling what it has been working hard to craft into a sustainable revenue stream with healthy profit margins? The write up reports:
HPE’s software unit generated $3.6 billion in net revenue in 2015, down from $3.9 billion in 2014. The company has said revenue growth in its software unit has been challenged by a market shift toward cloud subscription offerings.
Yep, these numbers will drive potential buyers into a frenzy.
The word in Harrod’s Creek, Kentucky, is that HPE is eager to find a way to make money, boost the company’s value to shareholders, and plug into to the fluffy cloud opportunities. HPE’s present software may not be the answer for HPE. Another outfit should be able to release a flood of revenue.
One of the goslings (un-named, of course) thought that HPE was going cold turkey to kick its Autonomy habit. The shadow of the search business makes life chilly for the would be technology leader. In an “exclusive” comment to Beyond Search, HPE anticipates victory in its legal flap associated with the purchase of Autonomy for an modest $10 or $11 billion.
We don’t know if our un-named gosling is on the right track, but if HPE sells Autonomy and other assorted gems from its software vault, the difference between what HPE paid for Autonomy and then the amount generated by the sale of Autonomy is only a couple billion dollars.
What’s a few billion dollars for a focused, consistent, well managed outfit like HPE? A pittance I say.
I wonder, “Does the buyer of HPE’s Autonomy-infused bundle recognize the excitement selling search and retrieval will engender?” Sure. These are savvy folks. Generating revenue from proprietary search and content processing software is really easy.
If Google can do, anyone can, right? Oh, Google closed its enterprise search product. Well, what about Palantir? Oh, Palantir relies on open source for findability functions. How about IBM? Oh, shucks, IBM relies on Lucene with home brew code and acquired technology.
As I said, search is easy.
Stephen E Arnold, September 7, 2016
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