Hewlett Packard Enterprise Company · NYSE:HPE
Hewlett Packard Enterprise — Merger or Acquisition (November 2016)
35 slides from Hewlett Packard Enterprise's merger presentation, Nov 1, 2016
Slide 1: Micro Focus Overview
cl Micro Focus Overview
Slide 2: Micro Focus key facts
Micro Focus $1.4bn Offices Worldwide 20,000+ Customers Annual Revenue 5,000+ Partners 80+ 4,500+ Employees 2
Slide 3: We Are a Software Company
Everything is organised to help us do this:Our systemsThe way we interact with customers and partnersHow we deliver consulting servicesWe aim to provide investors with a sustainable return of between 15% to 20% per annumIn doing so we need to be building a company with sustainable prospects for the
Slide 4: Micro Focus helps customers innovate faster with lower risk
Micro Focus helps its customers to innovate faster with lower riskWe enable them to embrace new technology while building on what already works. We call this bridging the old and the new 4
Slide 5: An Evolutionary Journey Resulting in Great Complexity
An Evolutionary Journey Resulting in Great Complexity- all in the last 35 years! Internet of Things (IoT) z / OSPL / I COBOL CICS IMS Public Cloud PrivateCloud 5
Slide 6: Portfolio positioning and approach in context of the software industry
Portfolio positioning and approach in context of the software industry Software company leading consolidation in the mature infrastructure software market to win through operational efficiency and scale Product lifecycle Introduction Growth Maturity Decline Area of primary Micro Focus focus New tech
Slide 7: Portfolio positioning and approach (cont'd)
Portfolio positioning and approach in context of the software industry (cont’d) Micro Focus specialises in managing mature infrastructure software assets which have been delivering value to significant numbers of customers over long periods of time Product portfolio characteristics Micro Focus appro
Slide 8: Management team
Name Role Prior experience Kevin Loosemore Executive Chairman (11 years) Appointed non-executive Chairman of the Company in 2005 Executive Chairman in April 2011Previously non-executive Chairman of Morse plcPreviously, Kevin has acted as Chief Operating Officer of Cable & Wireless plc, President of
Slide 9: Non-executive Directors
Non-executive Directors Karen SlatfordSenior Non Executive DirectorHP 20 years – VP & GM WW Sales & Mktg, Independent Director on multiple tech Boards Tom VirdenNon Executive DirectorMarketing in Apple and Lastminute.com, has led multiple start ups Richard AtkinsNon Executive DirectorIBM Global Serv
Slide 10: Product Portfolio
Product Portfolio Identity, Access and Security Solutions 16% Host Connectivity Solutions 14% Linux and Open Source 18% Development and IT OperationsManagementTools 13% Collaborationand NetworkingSolutions 11% COBOL Development and MainframeSolutions 18% Development and IT OperationsManagementTools
Slide 11: Product Group Operating Model & Structure
North America International(EMEA, LATAM) APJ Corporate Operations Finance IT HR Product Development Legal Business Operations & PMO Field Marketing Product Management Go To Market Product Development NA, EMEA & APJ(LATAM from MF shared team) Product Management Field Marketing Services, Customer Care
Slide 12: Years; 20,000 Customers
40 Years; 20,000 Customers 12
Slide 13: Value Creation
cl Value Creation
Slide 14: Micro Focus' share price has shown consistent growth
On a dollar basis, Micro Focus' share price has shown consistent growth… Micro Focus share price progression (denominated in $, rebased to 100) +306% Source: FactSet as at 09 August 2016, broker researchNote: Micro Focus share price converted to dollar equivalent at daily prevailing spot rateMicro F
Slide 15: Shareholder Value Creation
Shareholder Value Creation Cents per share 15
Slide 16: Acquisitions to Strengthen our Customer Proposition
CompuWareApplication Testing LiantCOBOL and PL/I development OrbixCORBA Novell, NetIQ, Attachmate, SUSEIdentity, Access, SecurityHost ConnectivityCollaborationPerformance MonitoringWorkload ManagementCloud ManagementEnterprise Linux BorlandApplication Lifecycle Management & Testing Acquisitions to S
Slide 17: Micro Focus made eight major acquisitions in last 10 years
10_84 Note: Does not include acquisitions smaller than $10M: Authasas (’15), Openfusion (’13), Soforte (’13), Relativity (’09) and Liant (’08).*Values for Borland, NetManage, Acucorp and Accurev are operating profit, not EBITDA. **Orbix acquisition value includes other assets acquired from Progress
Slide 18: Net operational improvement accounts for ~36% of EBITDA growth
Net operational improvement accounts for ~36% of Micro Focus’ EBITDA growth over last 10 years 18 Micro Focus’ EBITDA evolution ($mm) Note: Does not include acquisitions smaller than $10M: Authasas (’15), Openfusion (’13), Soforte (’13), Relativity (’09) and Liant (’08).Values for Borland, NetManage
Slide 19: Micro Focus Financial Performance vs Street Consensus
Micro Focus Financial Performance vs Street Consensus Source: Bloomberg as of 12-Aug-20161Underlying Adjusted EBITDA. Kevin Loosemore became Executive Chairman of Micro Focus in 2011Mike Phillips joined Micro Focus as CFO in September 2010Stephen Murdoch joined Micro Focus in 2012 as CMO and became
Slide 20: Financial Performance vs Management Guidance
20 Financial Performance vs Management Guidance Source: Company filings, Wall street research and Bloomberg as of 12 August 2016 Micro Focus FTSE 250
Slide 21: UK Market Dominated by Global Blue-chip Investor Base
UK Market Dominated by Global Blue-chip Investor Base, many of which are Long-term Shareholders of Micro Focus Source: Company register, J.P. Morgan Cazenove shareholder analysis, Junction RDS as at July 2016Note: Average buy in price calculation based on register data since 2008, converted at USD /
Slide 22: Prelims Roadshow – Investor Feedback
“Strong numbers, great FCF conversion”“They should stick to their proven strategy of buying sticky, ex growth businesses with good synergy potential”“Thinks the management team are very good. Cash flows are reassuring and really like the way they manage balance sheet”“Hard to fault the execution and
Slide 23: HPE Software Combination Offers a Unique Opportunity
HPE Software Combination Offers Micro Focus a Unique Opportunity to Create an Industry Leader that Can Consolidate at a Much Larger Scale 23 Sources: Capital IQ and HPE Software management financials. LTM as of 31-Jul-2016 Potential targets to consolidate and create scale in maturing market 23 #6 #2
Slide 24: Strategic Rationale for Combination
Strategic Rationale for Combination
Slide 25: Combination Rationale
Combination Rationale Focus on EBITDA and FCF growthFocus on Total Shareholder ReturnsMaintain a stable platform to deliver results Adds additional breadth and scale to Micro Focus’ existing portfolio of sticky products in core areas, with strong cash flowsIncreased exposure to fast growing segments
Slide 26: Combined Business Overview
Combined Business Overview Micro Focus HPE Software Pro forma Geography Type Business ` 72% recurring 61% recurring 64% recurring Source: Management presentations; Note: Pro forma financials based on combined values for company’s respective financial yearsNote: Pro forma for Serena 26
Slide 27: Integration Planning
cl Integration Planning
Slide 28: Integration Approach
Minimise Day 1 changes – ensure changes are well planned – key integration planning over the first 90 days*Multiple joint workstreams to plan and, post completion, manage changes and deliver to integration objectives:Identify, leverage and embed best practiceDecide where teams fit, and the shape of
Slide 29: Benefits to Customers, Employees & Investors
Benefits to Customers, Employees & Investors Customers Get greater return from their prior investmentsAccess to wider and deeper pool of leading products and skillsBenefits from greater geographic coverageService from a dedicated provider of infrastructure software productsBest practice advantages f
Slide 30: A phased approach to delivery and setting market expectations
A phased approach to delivery and setting market expectations Phase I: Assessment Deliver plans for FY17Detailed review of combined businessesInvigorate Product Management Actions Phase II: Integration Actions Standardise systemsRationalise PropertiesRationalise Legal entitiesNew Go to Market (GTM)
Slide 31: Summary
Summary 31 An opportunity to deliver exceptional value to HPE and Micro Focus shareholdersUtilise proven tax efficient structureEnable shareholders to participate in significant upside versus all cash alternativeExperienced management team and proven model reduces riskCreate lead position in a conso
Slide 32: Slide 32
Slide 33: Disclaimer
Disclaimer NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. This presentation does not constitute or form part of any offer or invitation to sell
Slide 34: Disclaimer (Cont'd)
Disclaimer (Cont’d) Neither this presentation nor the information contained herein constitutes or forms part of an offer to sell or the solicitation of an offer to buy securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from
Slide 35: Disclaimer (Cont'd)
Disclaimer (Cont’d) Subject to any requirement under applicable law, Micro Focus undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should not place undue reliance on forward-looking statements, w
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