Elliott’s driving takes a share in Hewlet Packard Enterprise – how can it create value

Business: Hewlett Packard Enterprise is the global company “Edge-Wloud”. It provides open and intellectual technological solutions as a service. The company offers cloud services, calculations, computing and artificial intelligence, intellectual edge, software and storage. Its segments include server, hybrid cloud, intellectual land, financial services, corporate investments and others. Server segments are composed of general -purpose servers for computing with multiple work, optimized server load and integrated systems. Its hybrid cloud segment offers a number of cloud and hybrid solutions in storage, private cloud and software infrastructure. Its intellectual Edge segment offers switching local and wireless local networks, campus, compartment and switching centers and others. Its financial services segment provides flexible investment solutions such as leasing, financing, IT consumption, utilities and asset management services.

The stock market value: $ 19.88b ($ 15.14 per share)

The main engine of the HPE underestimation is poor performance and loss of the market. In Q1 HPE reported Pure revenue decrease in its main server business. The company attributed this loss to server on cost of inventory costs that went unnoticed to the end of the quarter. As a result, the stock was sharply sold on days After earning a company. Meanwhile, Dell reported Beats both by income and margin for the same quarter. However, this is not an isolated incident, but rather the latter in history of lack of work. Ever since Dell resumed bidding at NYSE in late 2018, it exceeded HPE’s profit by more than 200%.

While its Server Business is a major business for HPE, much of the opportunities here revolves around the network business. This is a higher multiple business that Dell does not have. The HPE Intellectual Business Business is a third of the company’s profits, as well as networks, such as Cisco Trade, 12 times EBITDA. If the intellectual land was traded on this plural, today it would cost the whole value of HPE. This leaves considerable value to the company’s mainstream business and its cloud, even if these businesses continue to trade 5 times EBITDA. This value increases significantly with the best management and efficiency of management, which should lead to this business to 7-time Dell. In addition, while the HPE differentiate is a high multiple network business, the main Dell-Del-multippine and desktop differentiate, so you can do the case that a similar HPE business should trade in more than Dell.

There is also a serious uncertainty that hangs over HPE – its expectation of acquiring Juniper Networks, network peers at HPE and Cisco. A $ 14 billion transaction originally announced In January 2024.Haved. Earlier this year the Ministry of Justice sued the acquisition of acquisitionsaying it will be Eliminate competition. This uncertainty puts HPE in the decisive point of spraying, which, in fact, does not like – especially if the management lacks the results of savvy performance. Potential complications here are obvious: if the transaction is blocked, HPE will have more than 25% of the network capitalization of net cash, which is concerned that the guide may pursue a quick and risky acquisition to offset this failure. Conversely, if the transaction goes, given the recent errors HPE steps, investors can worry whether the company will effectively integrate the business size of juniper. So, despite the fact that the acquisition of juniper significantly improves HPE profitability to almost 50%, attributed to higher several network businesses, many market participants can consider it as a lost place. But with the right supervision, this should be a win -win.

Here Elliott comes as a potential value creator for HPE. With a sufficient shareholder office on the council, which will restore the confidence that the company will be well -set at the cost of shareholders, the uncertainty of juniper can turn into a great opportunity for shareholders regardless of whether it is closed or not. If the transaction is blocked and the council has a strong shareholder representation, shareholders will have confidence that a big pure monetary position will be used reasonably, whether it will be careful and disciplined acquisition, which creates value or buy shares in these depressive values. When the transaction is closed, shareholders will have more confidence that the updated council will do better work on the integration of juniper. Elliott is one of the most prolific investors today with the history of effective and successful strategic activity in the technology sector. Over the past 10 years, the firm has attracted 25 technology companies and brought an average of 20.60% against 8.56% for Russell 2000 for the same periods. However, in six of these 25 situations, when Ellios received the Council representation, the firm returned an average of 45.53% against 15.35% for Russell 2000 over the same periods. It is important to note that Elliott has a deep acquaintance with juniper, previously engaged in the company since 2014-2015. In this participation, Elliott called for a great distribution of capital and strategic initiatives, eventually settling Seat the board For Gary Duhendt and Kevin Denuchcha. It is noteworthy that denucca is Still on the juniper board Today.

While we believe that Elliot activist and HPE cost independently throughout the activist’s cycle, given the economic climate today, we would not mention the tariffs. HPE is probably in a better position than Dell to face certain geopolitical winds. Most HPE servers are in line with the US-Mexico Cape agreement and are made in Mexico. Unlike this, a considerable part of the Dell PC products are produced in China and therefore is much more tariff.

Ken Skvir is the founder and president of the 13D monitor, an institutional scientific and research service for shareholders’ activity, as well as the founder and managers of the 13D -activist fund portfolio, a mutual fund that investes in the portfolio of 13D investments.