Hewlett: Are They a Take-Out After Six Years of Whitman?

[Kerry Main]

More fuel for whether HPE's rapid diet in the last 18 months
means they are getting ready for buyout-

Sept 19, 2016 -

http://on.barrons.com/2cAeykR
"Hewlett: Are They a Take-Out After Six Years of Whitman? Asks
Bernstein

Shares of Hewlett Packard Enterprise (HPE) are up 54 cents, or
2.4%, at $22.80, following a note this morning from Bernstein's
Toni Sacconaghi pondering whether the $23 billion (market cap)
company could get acquired.

With Meg Whitman being talked about as a potential cabinet member
in a Hillary Clinton administration, Sacconaghi, who has an
Outperform rating on the stock, and a $24.50 price target, muses
that "its [HPE's] enterprise value would be just $13B -
undersized vs. leading competitors, and potentially a
reasonably-sized bite for a takeout."

"We note that CEO Whitman has now been at HP for 6 years, just
turned 60, and has a long held interest in politics. A sale of
all of HPE could present an attractive final coup."

Sacconaghi sees complications for several potential buyers such
as Lenovo Group (0992HK) and thinks private equity is more
likely, but he's not banking on it:

Possible acquirers include strategic buyers (Huawei, Lenovo,
Tsinghua, Oracle, Cisco and Dell), but all appear to have
stumbling blocks. On net, we believe a private equity buyout
might be more likely: though the deal size (~$18B excluding HPFS
net debt) would be high, we see the transaction as both doable
and value creating. Importantly, we note that any transaction
could be subject to tax if completed (or potentially even
negotiated) in the next year, given the timing of HPE's tax-free
spin-offs, presenting another potential roadblock. We suspect
that HPE will continue to advocate a strong capital return policy
over the next year, but if a buyer does not emerge over time, we
believe there would likely be a shift towards improving growth,
in part through select acquisitions. On net, while a near-term
buyout of RemainCo is possible, it is not central to our
investment thesis. We continue to believe that the implied value
of RemainCo (~6x earnings, ex cash) is simply too inexpensive,
and that risk/reward is attractive.

[KM - my bet is on Cisco with its $60B cash on hand as a means to
go up against the new Dell/EMC for leadership of future
infrastructure market. They could simply drop/sell the current HP
network business]

Regards,

Kerry Main
Kerry dot main at starkgaming dot com

[Simon Clubley]

On 2016-09-20, Kerry Main <kemain...@gmail.com> wrote:
>
> "We note that CEO Whitman has now been at HP for 6 years, just
> turned 60, and has a long held interest in politics. A sale of
> all of HPE could present an attractive final coup."
>

Perhaps she could put Hillary in touch with people who know how to
scrub email archives without them having to ask about it on Reddit ? :-)

>
> [KM - my bet is on Cisco with its $60B cash on hand as a means to
> go up against the new Dell/EMC for leadership of future
> infrastructure market. They could simply drop/sell the current HP
> network business]
>

On a more serious note:

Would Cisco have any clue about how to handle and market the HP
server range (especially the services and software) ?

Surely HPE are still big enough that there could be antitrust
issues unless the buyer is very carefully selected and hence any
potential issues around market consolidation are avoided ?

Simon.

--
Simon Clubley, clubley@remove_me.eisner.decus.org-Earth.UFP
Microsoft: Bringing you 1980s technology to a 21st century world

[Kerry Main]

> -----Original Message-----
> From: Info-vax [mailto:info-vax...@rbnsn.com] On Behalf
> Of Simon Clubley via Info-vax
> Sent: 20-Sep-16 3:00 PM
> To: info...@rbnsn.com
> Cc: Simon Clubley <clubley@remove_me.eisner.decus.org-
> Earth.UFP>
> Subject: Re: [Info-vax] Hewlett: Are They a Take-Out After Six
> Years of Whitman?
>

> On 2016-09-20, Kerry Main <kemain...@gmail.com> wrote:
> >
> > "We note that CEO Whitman has now been at HP for 6 years,
> just turned
> > 60, and has a long held interest in politics. A sale of all
of HPE
> > could present an attractive final coup."
> >
>
> Perhaps she could put Hillary in touch with people who know how
> to scrub email archives without them having to ask about it on
> Reddit ? :-)
>

Fwiw, my understanding of normal legal issues with deleting data
is that she could have avoided all this with a data management
policy in place which stated "after XXX days, all email will be
deleted from the server".

You have to prove via audit logs that you do follow the policy,
but that is apparently, the legal way to do these things.

As far as taking hammer to old cell devices - the recommended
best way for most companies to clean or wipe old devices is
destroy the device holding the data, so that is in line with most
company policies.

> >
> > [KM - my bet is on Cisco with its $60B cash on hand as a
means
> to go
> > up against the new Dell/EMC for leadership of future
> infrastructure
> > market. They could simply drop/sell the current HP network
> business]
> >
>
> On a more serious note:
>
> Would Cisco have any clue about how to handle and market the
> HP server range (especially the services and software) ?
>

Cisco has its own blade servers but it is a small part of the
overall blade market.

Outside of the platform OS's, and some basic server mgmt. prods,
as a result of the spinning off its SW business to Micro Focus,
HPE does not have much software left now.

Cisco might want to become a bigger infrastructure / Services
player in the same way Compaq bought DEC and HP bought Compaq.

> Surely HPE are still big enough that there could be antitrust
issues
> unless the buyer is very carefully selected and hence any
> potential issues around market consolidation are avoided ?
>

The $60B Dell/EMC (including VMware) deal went through, so the
Govt would have a hard time stating a Cisco/HPE deal should not
go through.

Related article:
http://www.nextplatform.com/2016/09/15/server-peak-x86/