Bloomberg reported that Elliott Investment Management quietly acquired a stake in HewlettPackard Enterprise Co. worth over $1.5 billion, making it one of its top five investors.
Reports state that the activist hedge fund known for aggressive shareholder campaigns within the tech industry is likely to demand changes at HPE to increase shareholder value, though its exact requirements are still unknown.
Elliott and HPE both declined to comment.
HPE’s shares surged by up to 8.8% during early trading on Tuesday before reversing their gains. It was currently up about 4.6% at the time this article was written.
The stock is still down more than 30% for the year, reflecting investor concern about the direction of the company and its profitability.
HPE is left behind in the AI boom
HPE, compared with its peers such as Dell Technologies, has been unable to take advantage of the strong demand generated by the artificial intelligence trend for server and networking hardware.
The company announced in March that it would have a significantly lower profit for the entire year. It cited tariff effects, low server margins and operational problems within the organization.
It also announced at the time plans to reduce 3,000 positions.
The analysts have been harsh. Bloomberg Intelligence’s Woo Jin ho said that HPE’s performance in the first quarter was “disappointing.” While Deutsche Bank’s Woo Ji Ho called HPE’s “meaningful” inefficiencies.
The company is still facing profitability challenges despite operating under USMCA, which reduces certain tariffs.
Elliott has a track record for delivering turnarounds
Elliott is well-known in the technology industry. He has successfully advocated for change within firms such as Salesforce, SAP and Citrix.
Citrix, for example, was privatized in 2022 in a 13 billion dollar deal led by Elliott & Vista Equity Partners.
The hedge fund at Salesforce pushed for growth plans which helped Salesforce avoid a proxy war. SAP’s CEO was replaced within six months after Elliott’s involvement became public.
It also owned a stake in Dell for a very long time, and Dell has outperformed HPE since then.
Dell shares are up nearly 300% since they returned to the public market in 2018.
The focus shifts from Juniper to leadership and the Juniper deal
HPE was spun-off from HP Inc., in 2015. It is now led by Antonio Neri.
The company was active in acquiring companies under his leadership. Nimble Storage was acquired in 2017, and Cray Inc. is expected to be purchased in 2019.
The regulatory hurdles have slowed down the largest acquisition to date, the $14 billion purchase of Juniper Networks that was announced in early this year.
US Justice Department filed a suit to block merger on antitrust basis, casting doubt over future of transaction.
Trials have been planned for July. This deal is strategic as it will significantly boost HPE’s network business in the face of increasing AI infrastructure demands.
There are increasing speculations that with Elliott’s participation, major changes in leadership or operational strategy could be imminent.
As seen with Crown Castle and Johnson Controls, the fund was able to reshape company boards as well as force out executives.
Investors are optimistic for now about Elliott’s entrance, hoping that it can reignite growth at the struggling enterprise giant.
As new information becomes available, the post HPE Stock rallies After Elliott Investment Reportedly Builds $1.5B Stake may be updated.
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