Tax Matters: HPE Set To Reap $300M Windfall From HP Inc.

‘For the channel the separation of Hewlett Packard into HP Inc. and HPE clarified what was a convoluted model with both PCs, printers and a wide array of enterprise infrastructure,’ says Future Tech CEO Bob Venero.

Hewlett Packard Enterprise is set to reap a $300 million windfall from HP Inc. as a result of a “tax matters’ termination agreement related to the formal separation of the two companies four years ago.

Under the ‘Termination Agreement,’ HP has agreed to pay HPE $200 million on or before Oct. 31, 2019; $50 million on or before Oct. 31, 2020 and $50 million on or before Oct. 31, 2021, according to a filing Monday with the U.S. Securities and Exchange Commission.

[Related: New HP CEO Enrique Lores On The 'Big Change' Coming To The Print Business Model]

The original Tax Matter Agreement governed the two companies’ rights, responsibilities and obligations with respect to “the preparation and filing of tax returns, the control of audits and other tax proceedings, and assistance,” according to the SEC filing.

HPE said it intends to file a copy of the termination agreement in its next 10-K annual filing.

CRN reached out to HPE and HP Inc. but had not heard back at press time.

“This is nothing more a standard separation agreement that the two organizations had with regard to tax implications,” said Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 101 on the CRN 2019 SP500.

Venero said the landmark separation of Hewlett Packard Inc. – the original crown jewel of Silicon Valley – into two separate companies – HPE and HP Inc.- has been a big success opening the door for both companies to focus on their core markets and capabilities.

“For the channel the separation of Hewlett Packard into HP Inc. and HPE clarified what was a convoluted model with both PCs, printers and a wide array of enterprise infrastructure,” he said.

Since the split, Venero said Future Tech’s HP Inc. business has soared with a sharp focus on secure printing paying off in big benefits for the solution provider and its customers.

“There is no question the tools and technologies that HP has provided us with regards to cyber-threats and the threat matrix around the printer market has allowed us to win opportunities that normally we wouldn’t have been able to,” he said.

As for HPE, the separation has unleashed a wave of innovation including HPE’s breakthrough GreenLake pay-per-use model and blockbuster acquisitions like Nimble, which provided HPE with the InfoSight artificial intelligence predictive analytics software platform, said Nalit Patel, CEO of All Solutions, a Livingston, N.J based solution provider. “The separation has allowed HPE to focus on its core business,” he said.

GreenLake has become an on premise consumption offering that provides the economics of public cloud with the security and flexibility of an on premise model, said Patel.

“Customers pay only what they need like a utility,” he said. “If they use 280 kilowatts they only pay for 280 kilowatts,” he said. “And HPE stands behind the solution from a compliance and regulatory perspective. That is really important.”