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Shares of Hewlett Packard Enterprise, formed after
Hewlett-Packard Co formally split in November, rose 10.5 percent
in extended trading on Tuesday.
Falls Church, Virginia-based Computer Sciences' shares jumped
19.5 percent to $42.60.
Under Chief Executive Meg Whitman, Hewlett Packard Enterprise
has been restructuring its IT consulting and services group.
The company sold at least 84 percent of its 60.5 percent stake
in Indian IT services provider Mphasis Ltd to Blackstone Group
for $1.1 billion in April.
HPE is expected to have $33 billion in annual revenue after the
spinoff and will concentrate on its remaining enterprise group
that includes its cloud services business and makes servers,
routers and switches.
Revenue from the enterprise group business rose about 7 percent
to $7.01 billion in the second quarter ended April 30, from a
year earlier, on a constant currency basis.
However, revenue from the enterprise services business, which
the transaction values at about $8.5 billion after tax, fell 2
percent at $4.7 billion year-over-year.
The enterprise services business fell 6 percent year-over-year
in the previous quarter.
HPE, which houses the former Hewlett-Packard Co's corporate
hardware and services division, said the merger of the two
businesses is expected to produce cost synergies of about $1
billion in the first year after close, expected by March 2017.
Computer Sciences Chief Executive Mike Lawrie will become
chairman, president and CEO of the new company, 50 percent of
which will be owned by HPE shareholders. Whitman will join the
board of the new company.
The new company's board will be split evenly between directors
nominated by HPE and CSC.
HPE expects $900 million in separation charges regarding the
merger, of which $300 million will be recorded in 2016, Chief
Financial Officer Tim Stonesifer said on a conference call with
analysts.
HPE, which also added $3 billion to its share buyback, said
total revenue rose 1.3 percent to $12.71 billion in the second
quarter. Analysts on average had expected $12.33 billion,
according to Thomson Reuters I/B/E/S.
Goldman Sachs & Co is serving as financial adviser to HPE, while
RBC Capital Markets is serving as financial adviser to CSC.
(Reporting by Alan John Koshy and Kshitiz Goliya in Bengaluru;
Editing by Sriraj Kalluvila and Maju Samuel)
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