Image Source: Unsplash

Elliott Investment Management has quietly built a stake worth more than $1.5 billion in Hewlett Packard Enterprise Co. (HPE), becoming one of the networking and software company’s top five shareholders, according to a Bloomberg report citing people familiar with the matter.

The activist hedge fund, known for its aggressive shareholder campaigns in the tech sector, is expected to push for changes to enhance shareholder value at HPE, although its exact demands are not yet known, the report said.

Both Elliott and HPE declined to comment on the development.

The move sent HPE shares surging by as much as 8.8% in early Tuesday trading before paring gains. At the time of writing, it was up by about 4.6%.

Despite the boost, the stock remains down by more than 30% year-to-date, reflecting ongoing investor concerns about the company’s direction and profitability.

AI boom leaves HPE lagging behind

Although the artificial intelligence wave has driven strong demand for servers and networking hardware, HPE has struggled to capitalize on the momentum compared to peers like Dell Technologies.

In March, the company warned of significantly lower profits for the year, citing tariff impacts, thin server margins, and internal operational issues.

At the time, it also announced plans to cut 3,000 jobs.

Analysts have been critical. Woo Jin Ho of Bloomberg Intelligence said the company’s guidance pointed to “meaningful inefficiencies,” while Deutsche Bank called HPE’s first-quarter performance “disappointing.”

Despite operating under the terms of the US-Mexico-Canada Agreement (USMCA), which eases some tariff burdens, the company continues to face profitability headwinds.

Elliott’s track record of achieving turnarounds

Elliott has an established reputation in the tech industry, having successfully agitated for change at firms like Salesforce, SAP, and Citrix.

Notably, Citrix was taken private in a $13 billion deal led by Elliott and Vista Equity Partners in 2022.

At Salesforce, the hedge fund pushed through growth plans that helped the company avoid a proxy battle. SAP replaced its CEO within six months of Elliott’s involvement becoming public.

The firm also had a long-standing stake in Dell, which has since outperformed HPE dramatically.

Dell shares have soared nearly 300% since returning to public markets in 2018.

Focus shifts to Juniper deal and leadership

HPE, which was spun off from HP Inc. in 2015, is currently helmed by Antonio Neri.

Under his leadership, the company has been an active acquirer. Key purchases include Nimble Storage in 2017 and Cray Inc. in 2019.

Its largest deal to date—a $14 billion acquisition of Juniper Networks announced earlier this year—has hit regulatory roadblocks.

The US Justice Department has filed a lawsuit to block the merger on antitrust grounds, casting uncertainty over the transaction’s future.

A trial has been scheduled for July. The deal holds strategic importance as it would significantly bolster HPE’s networking business amid increasing AI-related infrastructure demand.

With Elliott’s involvement, speculation is mounting that major operational or leadership changes could be on the horizon.

The fund has previously succeeded in reshaping company boards and even forcing out top executives, as seen at Crown Castle and Johnson Controls.

For now, investors appear optimistic about Elliott’s entry, hoping it could reignite growth and discipline at the underperforming enterprise giant.

More By This Author:

Gold May Stay In Overbought Zone Amid Persistent Global Uncertainty
GLD ETF Stock: Here’s Why The SPDR Gold Fund Has Surged
Nvidia Unveils Plans For US-made AI Supercomputers Amid $500B Buildout