HP Enterprise has announced plans to spin off its IT services business in a joint venture with CSC. In the latest step in the company's transformation, CEO Meg Whitman said the group will focus going forward on its networking equipment and software business. The spin-off of Enterprise Services, expected to be completed by next March, will see HPE shareholders receive shares equal to 50 percent of the new company.
The merged group will have annual revenues of around USD 26 billion and continue to serve HP's existing customers. Mike Lawrie, the current head of CSC, will become CEO of the new company, and Whitman will join the Board of Directors. The new company's board will be split 50/50 between directors nominated by HPE and CSC. Mike Nefkens, the current EVP and GM of HPE's Enterprise Services business, will join the new company's executive team.
HPE expects USD 1 billion in cost synergies in the first year of the merger and as much as USD 1.5 billion after the first year. In addition the new company will take on USD 2.5 billion of HPE's debt. HPE said the one-time costs to separate the Enterprise Services segment will be offset by lower costs for its latest restructuring plan. It should also have a neutral tax impact, both for the company and shareholders, and have no impact on HPE's earnings outlook for this year.
