HP Enterprise, DXC Technology Shares Slip Post-Spinoff

Shares in Hewlett Packard Enterprise (HPE) edged down on the first day of trading following the spinoff of its enterprise services businesses, which merged with Computer Sciences (CSC) to create DXC Technology (DXC).

HPE stock closed down 1% to 17.57 in the stock market today. The stock opened at 18 on Monday after closing at 23.70 on Friday. Accounting for the difference between Friday’s close and Monday’s open were terms of the spinoff: HPE stockholders received about 0.086 shares of DXC common stock for each HPE share.

Shares in DXC Technology fell 1.8% to 67.95 on Monday.

HPE updated its financial outlook to reflect the spinoff, “which was largely in line with expectations,” and consistent with earnings-call commentary,  said Tim Long, a BMO Capital Markets analyst in a report.

HPE forecast second-quarter unadjusted earnings in a range of 33 cents to 37 cents a share vs. its earlier outlook of 41 cents to 45 cents. HPE forecast full-year 2017 earnings of $ 1.46 to $ 1.56 a share, down from the company’s prior guidance of $ 1.88-$ 1.98.

DXC assumed $ 600 million of HPE’s net pension liabilities and $ 400 million of HPE’s existing debt, while also paying a cash dividend of $ 3 billion, of which $ 1.5 billion will be used to pay down existing HPE debt.

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About 50.1% of the outstanding shares of DXC common stock is now held by pre-merger HPE stockholders, with pre-merger CSC stockholders holding 49.9% of shares.

HPE also plans to spin off its software business, which will be acquired by U.K.-based Micro Focus International. Jim Suva, analyst at Citigroup, said he expects a $ 3-per-share value to HPE shareholders from the software spinoff, expected to close in the fourth quarter.

Hewlett-Packard Inc. split into two publicly traded companies in November 2015, with its printer and PC business becoming HP Inc. (HPQ) HPE will still sell networking, data storage and servers to corporate customers.


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