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Hewlett Packard Enterprise (HPE) to Sell Stake in Mphasis?

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Recently, The Times of India reported that Hewlett Packard Enterprise Company (HPE - Free Report) is looking for potential buyers for its India-based company, Mphasis. According to the source, the tech giant is planning to sell its 60.5% stake in Mphasis for $1 billion.

Reportedly, HPE has hired Citigroup Inc. (C - Free Report) to assist in the sale process of the IT company.

Reuters cited the names of a few potential buyers including private equity giants Carlyle Group LP (CG - Free Report) and Blackstone Group LP (BX - Free Report) as well as Indian outsourcers L&T Infotech and Tech Mahindra Ltd.

Advent International and Bain Capital LLC are also reportedly looking to buy a 60.5% stake in MphasiS. However, none of the companies confirmed the news.

Hewlett-Packard purchased Mphasis when it acquired Electronic Data Systems in 2008 for approximately $13.9 billion. At the time, the company’s Technology Solutions Group segment shifted its outsourcing services operations and a part of its consulting and integration activities to Electronic Data. The Indian company has since functioned as an independent subsidiary of Hewlett Packard.

The sale of Mphasis comes at a time when the company is attempting to restructure its IT consulting and services group. Hewlett-Packard stated that it was planning to shed around 25,000 to 30,000 jobs in its enterprise business.

The primary reason for such a massive reduction is to reassure investors about Hewlett Packard’s continued focus on lowering expenses as well as its concerted efforts to improve profitability.

After about a year of consideration, Hewlett-Packard has successfully split itself into two standalone companies. It had announced in Oct 2014 that it would split its enterprise-facing hardware and service business and its consumer-facing computer and printer segments, with both companies trading publicly.

Effective Nov 1, 2015, the enterprise and service business-oriented company, Hewlett-Packard Enterprise, started trading under the ticker symbol “HPE” while the PC-focused business named, HP Inc., continues to trade under the symbol “HPQ”.

Though it might be difficult to sell Mphasis, we think HPE’s focus on restructuring its business will favor long-term growth.

Currently, HPE has a Zacks Rank #3 (Hold).

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