Hewlett Packard Enterprise confirmed rumors that it was selling off some of its software assets so the company could realign its portfolio around networking, storage, and datacenters.
HPE says it will "spin-merge" its non-core software assets with Micro Focus, a software company based in the UK, in a transaction worth around $8.8 billion.
Broken down, the deal gives HPE 50.1-percent ownership of the new combined company -- which is expected to have approximately $4.5 billion in annual revenue -- and a $2.5 billion cash payout.
HPE's software portfolio includes Vertica, ArcSight, and products from its acquisitions of Autonomy and Mercury Interactive.
The highly anticipated deal was announced along with HPE's third quarter results Wednesday after the bell.
In a press release, HPE CEO Meg Whitman stressed that the company is not getting out of the software business, rather making a pronounced pivot toward software-defined technology.
"Software is still a key enabler of our go-forward strategy, but we need the right assets to win in our target markets," said Whitman. "Moving forward, we will double down on the software capabilities that power and differentiate our infrastructure solutions and are critical in a cloud environment."
As for the numbers, the company reported third quarter earnings of $2.8 billion, or $1.32 a share, on revenue of $12.2 billion, down 6 percent from a year ago. Excluding charges, HPE delivered earnings of 49 cents a share.
Wall Street was looking for first quarter non-GAAP earnings of 45 cents a share on revenue of at least $12.64 billion.
Revenue for HPE's enterprise group was $6.5 billion, down 8 percent year over year, while servers revenue was down 4 percent, and storage revenue was down 8 percent. Networking revenue was down 22 percent, and technology services revenue was down 7 percent.
Enterprise services revenue was also down year over year with $4.7 billion in revenue. Software revenue was just $738 million, down 18 percent year over year.
In terms of outlook, HPE expects fourth quarter earnings between 58 cents and 63 cents a share. Analysts are expecting earnings of at least 60 cents a share.