HP Confirms H3C Sell-Off Amidst Declining Revenues

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51 percent stake of Chinese hardware business goes to Tsinghua Holdings as HP reports missed revenues but beats on earnings

Hewlett-Packard has confirmed it will sell a majority stake of its Chinese hardware business to a Tsinghua Holdings subsidiary for $2.3 billion (£1.5bn).

Unisplendour will acquire 51 percent of HP’s H3C Technologies, valuing the total business at $4.5 billion (£2.9bn).The new H3C will be providing servers, storage and networking hardware in China.

Growth

HP said that it sees continued long-term growth opportunities in China, and HP China will maintain total ownership of its existing China-based Enterprise Services, Software, HP Helion Cloud, Aruba Networks, Printing and Personal Systems businesses.

HPHP CEO Meg Whitman (pictured) said that the sale is a “bold move” to win in China’s technology market.

“Partnering with Tsinghua, one of China’s most respected institutions, the new H3C will be able to drive even greater innovation for China, in China,” she said. “The combined company will build upon an extensive and valuable patent portfolio, best-in-class products and customer focus, and Tsinghua’s world-class research capability. In one move, we have repositioned HP and H3C to accelerate overall performance and better serve our customers and partners.”

In truth, HP, along with peers Cisco and IBM among others have struggled to gain a foothold in China following the ongoing US spying allegations.The Chinese government is wary of US companies, and has started imposing restrictions on foreign technology firms, as well as choosing national technology providers for projects within the country.

Q2 results

The sale comes as HP reported its second quarter financial results for 2015, announcing HPrevenues of $25.45 billion (£16.25bn), down 6.8 percent year over year, but beating market expectations by delivering 87 cents per share rather than 85 cents per share.

The results show that almost every business group of HP’s has declined in revenue. HP’s net income fell to $1.01 billion (£650m), down from $1.27 billion (£810m) the previous year.

Enterprise Services revenue was hit the hardest, recording a drop of 16 percent year over year. Within the group, Infrastructure Technology Outsourcing revenue was down 20 percent, and Application and Business Services revenue declined 8 percent. Printing revenue was down 7 percent year over year. Total hardware units were down 4 percent.

Further costs were predicted for the upcoming split of the company. HP said it forecasts costs of $400-$450 million as its PC and printer business parts ways with its corporate hardware and services business.

Despite these losses, Whitman said she was pleased with HP’s results.

“Despite some tough challenges, we executed well across many parts of our portfolio, sustained our commitment to innovation, and delivered the results we said we would,” she said. “HP is becoming stronger as we head into the second half of our fiscal year and separation in November.”

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