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Hewlett Packard Enterprise (HPE) Stock is Plummeting Over 20%: Here's Why

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On Friday, shares of Hewlett Packard Enterprise Co. (HPE - Free Report) are plummeting, down over 20% in midday trading after the company announced the spin-off of almost all of its software business.

Hewlett Packard Enterprise’s software business, which includes the popular and widely used security platform ArcSight, has now been merged with British software company Micro Focus International, which trades on the London Stock Exchange under the ticker “MCRO.”

“With the completion of this transaction, HPE has achieved a major milestone in becoming a stronger, more focused company, purpose-built to compete and win in today’s market,” said Meg Whitman, Chief Executive Officer of HPE.  “And, this transaction will deliver approximately $8.8 billion to HPE and its stockholders.”

Today’s deal also marks the end of the company’s 2011 acquisition of British firm Autonomy, which Hewlett scooped up for $11 billion. At the time, the acquisition was to help push HPE forward as an enterprise software industry leader, but the deal was heavily criticized, and according to Reuters, Hewlett ended up taking an $8.8 billion writedown on it.

Hewlett’s next step, though, will be to quickly build up its software division, especially for its mixed data center areas. The company has also had to adjust to the change in enterprise software, as cloud computing services offered from competitors like Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) dominate the market.

HPE was created in 2015, along with HP Inc. (HPQ - Free Report) , as a spin-off from the Hewlett Packard Company. The company currently sits at a #3 (Hold) on the Zacks Rank, with a VGM score of ‘C.’

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