On September 7, 2016, HPE announced spin-off and merge of non-core software assets with Micro Focus. Here are the key points about the press release.

• Transaction valued at approximately $8.8 billion, including 50.1% ownership of the new combined company by HPE shareholders and a $2.5 billion cash payment to HPE
• Combination creates one of the world’s largest pure-play enterprise software companies
• Accelerates HPE’s strategy to unlock faster-growing, higher-margin and stronger free cash flow company
• HPE to discuss transaction during Q3 earnings call at 5:00 p.m. ET today.

First those do not know about the financial jargons, let me copy and paste from Investopedia.

What is spin-off?

A spinoff is the creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company.

Read more: Spinoff Definition | Investopedia

For example, a company might spin off one of its mature business units that is experiencing little or no growth so it can focus on a product or service with higher growth prospects. The spun-off companies are expected to be worth more as independent entities than as parts of a larger business.

Of course, you do know about what is merger definition. HPE sold the non-core assets to Micro Focus, so that HPE can concentrate on other key products which has more potential.

What is included in HPE spin-off and merge?

Following are the businesses which are included in the spin-off and merger:

HPE’s Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses.

Obviously HPE LoadRunner and other testing solutions are included. Micro Focus will operate above said businesses.

Micro Focus is a UK based company. Micro Focus has a good history of acquisition which includes Borland, The Attachmate Group, and other companies. You can read more about Micro Focus in this wiki page.

Borland acquired Segue Software on Feb 8, 2006. The products which Borland acquired from Segue Software are as follows: Silk Central, Silk Performer, and Silk Test.

If you take a performance testing solution Silk Performer which is now owned by Micro Focus. If you are a business owner, you do not sell two different products/services to the end user which serves the same purpose.

Now the big question is which tool the resultant company to keep and which one they eliminate. If they are going to sunset LoadRunner (it will take a couple of years for full obsolescence), then the existing customer need to migrate to the new tool or Silk Performer.

My questions:

1. Will the resultant company innovate brand-new product by taking the best from both the tools?
2. If they are sun-setting anyone tool, it will impact their customers. What is the road-map to retain those customers?
3. Is there any tool will be created for migration of scripts from tool ‘A’ to tool ‘B’
4. What will the plan for the user community portal, third-party plugins, open support tickets etc?

By this spin-off and merger, there are positives and negatives for both the parties including the competitors. HPE now focus on their product lineup, Micro Focus got the leading software assets, and other competitors will gain the customer base as there is no crystal clear road-map available on the solution.

Assume this scenario:

You are working on brand-new web application where you see a potential growth in next six months. For performance testing, you planned to leverage HPE LoadRunner or Silk Performer. Your QA team spends day and night to create robust scripts, scenarios, and executes 24×7. Suddenly Micro Focus announces that only one tool will be available in market place, another tool is going to sunset in next 6-12 months. Definitely you think twice whether to opt tool ‘A’ or ‘B’. Or you go with tool ‘C’.

I am expecting that HPE or Micro Focus should announce their roadmap and strategy of the products and solutions under the spin-off and merger umbrella.

Your turn:

What do you think about this spin-off and merger?

Are you foreseeing any impact in your organization?

Please share in the comments section.

References:

1. https://www.hpe.com/us/en/newsroom/news-archive/featured-article/2016/09/CEO-Meg-Whitman-on-HPEs-Plans-to-Spin-Off-Merge-Non-Core-Software-Assets-With-Micro-Focus.html
2. https://www.hpe.com/us/en/newsroom/news-archive/press-release/2016/09/1276021-hpe-accelerates-strategy-with-spin-off-and-merger-of-non-core-software-assets-with-micro-focus.html
3. http://www.radview.com/blog/why-micro-focus-loadrunner-acquisition-is-an-opportunity-to-move-to-webload/