Hewlett Packard's Software Arm to be Merged with Computer Sciences Corp
When Hewlett Packard split its hardware and sofrware operations last year, however no one really thought that the software arm Hewlett Packard Enterprise would try to spin itself off into an IT services within such a short period of time. According to a new announcement made by the company, Hewlett Packard Enterprise, which is led by Meg Whitman is all set to merge with Computer Sciences Corporation in order to build a consolidated IT services firm. The news will certainly come as a bolt from the blue for many but the move has been welcomed in the stock market as the shares of both HPE and CSC soared to new heights following the news of the merger.
CSC, who have clocked annual sales revenue of $26 billion, saw its shares jump 20% following the news and HPE shares on the other hand appreciated 11$ to finish at $18.05. Investor sentiment shows that the decision to create an IT services firm bodes well for both companies in the long run. The merger is expected to be completed in 2017 and considering the fact that CSC are a big name when it comes to government contract, it would only help in making the comined IT services firm a corporate behemoth. At the time of the Hewlett Packard split, HPE was valued at $50 billion and it has recorded $33 billion of sales annually, which would certainly unlock a lot of value for the merged entity from next year onwards. The two companies had been in talks about a possible merger for around three months and it seems that it is only a matter of time before they start working together.
HPE chief Meg Whitman had this to say about the development, "We (CSC and HPE) knew each other well after (the Nov. 1) separation, and saw the clear benefits" On the other hand, trade analysts have also been optimistic about the prospects of the merger, The principal analyst at Tirias Research named Jim McGregor said, "When it comes to IT services, it's about having coverage and global mass,The bigger you are, the more resources you have, the more likely you are to win major contracts, especially with the government. It's all about bulking up to be a major, worldwide supplier"
