Hewlett Packard Enterprise Co. (HPE) is realigning its portfolio and product roadmap through an $8.8 billion deal with Micro Focus, a software company based in Newbury, England.

Palo Alto, Calif.-based HPE, is spinning off non core software units, including assets which were owned by UK software group Autonomy.

In a blog post yesterday, Meg Whitman, president and CEO of HPE, said she was divesting units not aligned with the company's go-forward strategy. HPE plans to focus on selling data-center hardware and other commercial tech gear to other big organizations. 

The deal comes less than four months after HPE announced the sale of its business-services division to Falls Church, Va.-based systems integration giant
Computer Sciences Corp. for $8.5 billion.

HPE Shrinks as Micro Focus Grows

Last November, Whitman split the former Hewlett-Packard Co. into two separate entities: HPE, which houses the former HP corporate hardware, data center products and services division, and HP Inc., which sells personal computer and printer operations.

"The combination of HPE’s application delivery management, big data, enterprise security, information management and governance and IT operations management businesses with Micro Focus will create one of the world’s largest pure-play software companies," Whitman noted. 

Under terms of the deal, HPE will get a $2.5 billion cash payment and its shareholders will hold a 50.1 percent stake in the new combined company. The sale still requires antitrust approval. But if all goes as anticipated, it should close sometime between April and October next year. 

London-listed Micro Focus secured shareholder approval at its most recent annual meeting to pursue large acquisitions. It completed a $1.2 billion takeover of business software group Attachmate in 2014, and bought Serena Software earlier this year for $540 million.

HPE: Leaner, More Nimble

During an earnings call last night, Whitman described the sale of the software assets as the latest move in a strategic shift to make HPE leaner, more nimble and more focused on mobile and Internet of Things technologies. 

HPE was launched "with the vision to become the industry’ leading provider hybrid IT with the secure next generation software defined infrastructure that will run our customer’s data centers today, bridge them to multi-cloud environments tomorrow and enable the emerging intelligent adds that will power campus, branch and IoT applications for decades to come,” she said.

The deal will also enable HPE to turn the page on Autonomy, a botched 2011 acquisition by HP that resulted in allegations of a broad range of financial falsehoods and an $8.8 billion write down.

Micro Focus: Widely Diversified, $4.5B Company

The new Micro Focus will keep its listing on the London Stock Exchange, and the management will be British. Kevin Loosemore, Micro Focus Executive Chairman, and Mike Phillips, its Chief Financial Officer, will lead the company. 

However, Micro Focus will add two HPE representatives to its board of directors. 

The deal makes the firm one of the UK's biggest tech companies, with total annual revenues of $4.5 billion. It will also be widely diversified across product lines and geographies. 

Shares in Micro Focus jumped 18 percent in morning trading today. 

Loosemore called the deal — which he said he initiated earlier this year — "another significant milestone for Micro Focus" that is "wholly consistent with the long-term business strategy we have been pursuing to be the most disciplined global provider of infrastructure software."

Whitman's Strategic Vision

Whitman said HPE needs to slim down to respond to the new business realities created by cloud computing. The irony is that the deal was announced the same day Dell closed on the staggering $63 billion deal to buy EMC — making Dell into the kind of company HP was before it split its printer and harder business from its software interests. 

“So we are getting smaller, while they’re getting bigger," Whitman said. "They’re levering up and we are delivering."

HPE is streamlining its interests to focus on infrastructure and data centers.

“Both software and services are still key enablers of HPE's go forward strategy. Our newly created software defined and cloud business will build upon key software assets like OneView and the Helion Cloud platform to deliver software defined hybrid IT solutions like Synergy, HPE's composable infrastructure offering,” Whitman said.