HPE to Sell its Software Business to Thomas Bravo?

As per reports HPE's Software business is up for sale.  Since the separation last year, it is widely anticipated that HPE will slim down its portfolio by shedding non-core assets. Having already divested its Enterprise Services business to CSC in May of this year for $8.5 bn, its time now to axe the software business unit, so that the company can focus on the lucrative Storage, Server, Networking and the Datacenter business.

According to a latest Reuters report, it sates that Thomas Bravo has made the highest bid to acquire HPE’s software business. The deal value is being pegged between $8 bn to $10 bn. Reports also say that other players gunning for HPE’s software business are ones like Goldman Sachs, Vista Equity and Carlyle.

Thomas Bravo is a US based PE firm which has invested in a number of software companies, and the company in its website says that its investment strategy is based on the concept of “industry consolidation” or “buy and build’. Prominent tech companies in Thomas Bravo’s kitty boasts of names like Compuware, Bomgar Corporation, Deltek, DigiCert, Flexcera Software among others.

HP acquired its bulk of Software assets from its acquisition of Autonomy in 2011 and Mercury Interactive in 2006. HP shelled out $14 bn on these two acquisitions with its $10.3 bn Autonomy deal mired in controversy.

If we look at HPE’s software portfolio, for CY 15, it made $3.6 bn in net revenue and this division has been in the red for HPE, as in CY 15, the business saw a decline in revenue compared to $3.9 bn it posted in CY 14. So it makes sense for HPE to sell it.

Right now HPE’s software assets cater to a range of mission critical areas encompassing Big Data and Analytics, Enterprise Security, Hybrid Cloud Management, Application Delivery Management, Backup Governance and Operations Management. Despite the profitability decline, it’s a huge software arsenal that will greatly connect the gaps for Thomas Bravo and its diversified niche software companies it has on its fold.

Once HPE’s sells off its software business, it will predominantly be a company that will provide infrastructure to  Datacenters.