Elliott Management takes a stake in Hewlett Packard Enterprise – how it can create a value

a job: Hewlett Packard Enterprise It is a global company from edge to cloud. It provides open and smart technology solutions as a service. The company provides cloud services, calculation, high performance, artificial intelligence, smart edge, programs and storage. Its sectors include server, mixed cloud, smart edge, financial services, corporate investments, and others. Its server sector offers consist of general -purpose servers for multi -business computing servers, improved work servers, and integrated systems. Its cloud sector provides a set of cloud and hybrid solutions through storage, private cloud and infrastructure software space. Its smart sector provides the edge of the local and wireless domestic region networks, the campus, the branches, the data center, and others. The financial services sector provides flexible investment solutions, such as leasing, financing, information technology consumption, utility programs and asset management services.

Market value shares: 19.88 billion dollars ($ 15.14 per share)

It seems that the primary driver of the lowest Hpe value is a weak execution and loss of credibility with the market. In the first quarter, HPE mentioned Decreased net revenue In the basic server works. The company attributed this loss to pricing servers relative to the stock costs, which were not observed until late in the quarter. As a result, the shares were sharply sold in days After the company’s profits. Meanwhile, Dell reported the revenue and margin for the same quarter. However, this is not an isolated accident, but rather the latest in the history of weak performance. Since Dell resumed trading on the New York Stock Exchange at the end of 2018, HPE has surpassed more than 200 %.

Although its server business is the basic work of HPE, a lot of opportunity here revolves around network works. This is a higher multiple work that Dell does not have. HPE Smart Business Company represents a third of the company’s profits, and network peers such as Cisco Trade on 12-Times Ebitda. If the smart edge is traded in that multiple, it will be almost worth the value of the entire institution for HPE today. This leaves a great value of the company’s main server and its business’s business, even if these companies continue to trade in Ebitda 5 times. This value increases dramatically by implementing better management and efficiency, which must transfer these companies to multiple Dell deals with 7 times. Moreover, although HPE AFFICIATOR is a high multi -network business, the primary discrimination in Dell is low -significant computers on the desktop, so that a case can be provided that the similar companies to HPE must trade with higher complications than DELL.

There is also a state of great uncertainty that is suspended on HPE – the suspended acquisition of the Juniper networks, which is a counterpart of HPE and CISCO networks. A $ 14 billion deal, which was originally announced In January 2024to stop. Earlier this year, the Ministry of Justice Prosecuting to prevent acquisitionSaying that it will work Eliminate competition. This puts uncertain Hpe at a decisive turning point, which is something that hates its nature – especially when the administration lacks a busy record in smart implementation. Possible complications here are clear: If the deal is banned, HPE will have more than 25 % of the maximum market in net cash, raising fears that the administration may follow a hasty acquisition and risk to compensate for this failed deal. On the contrary, if the deal continues, given the recent HPE errors, investors may worry whether the company will be able to integrate Juniper effectively. Therefore, although getting Juniper would greatly improve the HPE profitability mixture to approximately 50 % attributed to the highest multimedia networks, many market participants may view this loss. But with the right control, the victory should be.

This is where Eliott comes as a potential value of HPE. Thanks to the representation of adequate shareholders on the Board of Directors, it regains confidence that the company will be strongly compatible with the value of the shareholders, the uncertainty from Juniper can turn into a great opportunity for shareholders regardless of whether it is closed or not. If the deal is banned and there is a strong representation of the shareholders in the Board of Directors, the shareholders will have confidence that the great net monetary position will be used wisely, whether through the process of temporary acquisition of value or buying shares in these depressed values. If the deal is closed, the shareholders will have more confidence in the fact that the refreshing plate will make the best Juniper integration. Elliott is one of the most abundant active investors today with a history of effective and successful strategic activity in the technology sector. In the past ten years, the company has shared 25 technology companies and has achieved an average return of 20.60 %, compared to 8.56 % for a 2000 messenger over the same periods. However, in the six of those 25 cases in which Elliot received the representation of the Board of Directors, the company returned with an average of 45.53 % compared to 15.35 % for Russia 2000 during the same time periods. More importantly, Elliott has a deep knowledge with Juniper, after previously participated in the company from 2014-2015. In this participation, Elliot called for a large group of capital allocation and strategic initiatives, and ultimately settled for Board seats For a Diettand, Kevin Denuchio. It is worth noting that Denuccio is It is still on the juniper board today.

Although we believe that the Elliott Activist and Value Campaign in HPE is convincing to a full active cycle on its own, given the economic climate today, we will be cabin not to mention something about the definitions. HPE is likely to be better than Dell to face a specific geopolitical wind. Most HPE servers are compatible with the United States, Mexico and Cananga Convention and are manufactured in Mexico. On the contrary, a large part of the products of personal computers in China are manufactured, thus being exposed to the risks of customs tariffs.

Ken Squire is the founder and head of 13D Monitor, an institutional research service on shareholders ’activity, founder and manager of the 13D activist Fund portfolio, a joint fund that invests in a set of 13D active investments.