HPE sets timetable for leaving China as it refocuses investments

Hewlett Packard Enterprise has quietly amended its timetable for divesting its stake in Chinese cloud services company H3C and announced the sale of part of its communications technology group (CTG).

“Our priority is to focus on the markets most relevant to customers’ needs across edge, hybrid cloud, and AI. Sometimes, this means identifying areas of our business that could be better nurtured and grown through another company or partner,” HPE CFO Marie Myers said in a blog post announcing the CTG sale.

Last year, HPE agreed to sell its 49% stake in H3C to majority owner Unisplendour International Technology. This agreement has been modified, the company revealed in an SEC filing Friday.

HPE will now initially sell shares representing 30% of H3C’s total share capital to Unisplendour for $2.1 billion by August 31. It will retain the right to sell the remaining 19% for about $1.4 billion within three years of the transaction closing. The deal is subject to regulatory and other approvals.

As for CTG, last week HPE announced that it is selling assets from the group to global technology company HCLTech. It will retain its telco solutions group, the part of CTG that provides operations support systems (OSS). That group will stay within HPE Aruba networking.

“For IT departments, these changes could mean a potential shift in vendor relationships and service dynamics,” said Scott Bickley, advisory practice lead at Info-Tech Research Group. “Organizations using HPE’s CTG services should prepare for a transition as HCLTech integrates these assets, and review existing contracts and SLAs to ensure continuity. These are the types of changes that IT departments must proactively manage to ensure service continuity, leverage new capabilities, and mitigate risks.”

Myers explained that the asset sale reflects the company’s current focus. “HPE has been transforming our telco solutions into a software-centric growth business in recent years,” she said. “And while CTG is a strong, profitable business driven by talented team members, we believe its model of creating and integrating custom solutions and products will be a better strategic fit with HCLTech.”

Closing is expected in six to nine months, subject to regulatory approvals and other conditions, Myer said, adding that “during that time, we also intend to hold discussions with HCLTech on an expanded strategic partnership.”

As well as divesting in key areas, the company has made a number of acquisitions designed to further its growth strategy. Myers highlighted three in her blog: Athonet (private 5G), OpsRamp (IT operations), and Axis Security. The upcoming purchase of Juniper Networks, scheduled to close in late 2024 or early 2025, subject to Juniper shareholder and regulatory approvals, will, she said, “create a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value.”