After its $8.5 billion spin-merger of its Enterprise Service business with Computer Sciences Corp. (CSC) last quarter, HP Enterprise (NYSE: HPE) has just announced an $8.8 billion deal to spin-merge its non-core software assets with Micro Focus. Hybrid cloud will be the focus for the new HP Enterprise while HP Inc. (NYSE: HPQ) continued to struggle with declining printing revenues.

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HPE’s Financials

After the first y-o-y growth reported in five years, HPE again saw declining revenues. Third quarter revenues declined 6% over the year to $12.2 billion, missing analyst estimate by $440 million. Non GAAP EPS was $0.49, beating analyst estimate of $0.45. It paid $1.5 billion in dividends and share repurchases to shareholders.

By segment, Enterprise Group revenue declined 8% to $6.5 billion with revenue from servers down 4%, storage down 8% and networking down 22%. Enterprise Services revenue fell 5% to $4.7 billion driven by 4% decline in Application and Business services and 6% decline in Infrastructure Technology Outsourcing revenue. Software revenues fell 18% to $738 million with License revenues falling 28% and professional services falling 8%. Financial Services revenue was up marginally by 1% to $812 million. Intersegment net revenue was $541 million.

For the fourth quarter, HPE expects non GAAP EPS of $0.58-$0.63 and GAAP EPS of $0.44 to $0.49. Analysts expect earnings of $0.60 on revenue of $13.13 billion.

HPE expects to end the year with non GAAP earnings of $1.90-$1.95 per share. The market was looking for earnings of EPS of $1.87 on revenue of $51.21 billion.

HPE’s SGI Acquisition

During the quarter, HPE also announced its plans to acquire data analytics solution provider SGI (NASDAQ: SGI) for $275 million. SGI products and services are used for high-performance computing (HPC) and Big Data analytics in the scientific, technical, business, and government communities to solve challenging data-intensive computing, data management, and virtualization problems. The company has approximately 1,100 employees worldwide, and had revenues of $533 million in fiscal 2016. The deal is expected to close in fiscal year 2017 and act as a catalyst for HPE’s growth in the HPC segment. According to IDC, the $11 billion HPC segment is expected to grow at an estimated 6-8% CAGR over the next three years. But it will face tough competition from the likes of Amazon, Microsoft, and Google.