HPE completes enterprise services spinoff, cuts outlook

With enterprise services no longer contributing to its financials, HPE is adjusting its outlook for the second quarter and fiscal year 2017.

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Hewlett Packard Enterprise said Monday that it has completed the spin-merge between its Enterprise Services (ES) business and Computer Sciences Corp (CSC), officially creating DXC Technology.

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The deal is expected to deliver about $13.5 billion to HPE after tax, including an equity stake in DXC, a cash dividend payment to HPE and DXC's assumption of debt and other liabilities.

With ES no longer contributing to its financials, HPE is adjusting its outlook for the second quarter and fiscal year 2017. HPE says the transaction will impact second quarter EPS by about 8 cents a share and fiscal 2017 diluted net EPS by approximately 42 cents a share, with both estimates including ES-related stranded costs.

HPE now expects fiscal 2017 Q2 non-GAAP net EPS to be between 33 cents to 37 cents, down from its prior outlook of 41 cents to 45 cents a share. Fiscal 2017 non-GAAP net EPS is now projected to be $1.46 to $1.56, below its prior outlook of $1.88 to $1.98.

From a GAAP perspective, HPE now expects a Q2 net loss per share in the range of 3 cents 7 cents, compared to its previous range of a loss of 3 cents to profit of 1 cent per share. Fiscal 2017 GAAP earnings per share are projected to be between 27 cents to 37 cents, below its prior outlook of 60 cents to 70 cents a share.

HPE noted that it will retain and continue to invest in Pointnext, its newly defined technology services organization, while also maintaining a strong relationship with DXC. HPE CEO Meg Whitman will take a seat on the DXC board.

"The close of this transaction leaves HPE with a crystal clear mission, tied directly to the solutions our customers and partners tell us they want most," Whitman said in a statement. "I am also particularly proud that this transaction will deliver approximately $13.5 billion in value to HPE and its stockholders, which is almost sixty percent higher than when it was first announced last year."

Hewlett Packard split its business into two publicly traded companies in November 2015, with HP Inc focused on PCs and printers and HPE concerned with commercial technology.

The technology giant announced its plan to split apart on October 2014, with Whitman saying at the time that the divestiture would give each company more independence, focus, financial resources and flexibility. CSC underwent its own split in 2015, which resulted in two separate publicly traded companies -- one focused on commercial businesses and the other on the public sector.

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