When Hewlett Packard Enterprise (HPE) reports second fiscal quarter results after the close Wednesday, CEO Meg Whitman can give an update on her wide-ranging overhaul of the company which may include breaking off or bolting on more businesses.

So far, Whitman has been breaking off chunks of the business. HPE split off its enterprise services business and merged it with Computer Sciences Corp. to create DXC Technology (DXC) in an $8.5 billion deal that closed in April. Similarly, the company is spinning off software operations and merging the business with Micro Focus International plc in a transaction valued at approximately $8.8 billion.

"Their balance sheet will be bolstered with the recent spin offs," said Angelo Zino of CFRA regarding Whitman's ability to strike more deals. "They will have the potential to remain acquisitive if they decide to do so."

HPE closed the $1 billion purchase of Nimble Storage and the $650 million purchase of IT infrastructure company SimpliVity already this year.

Cloud networking company Arista Networks (ANET) could appeal to HPE. 

"A name like Arista would fit perfectly in HPE's portfolio," Zino said. 

Price could be a problem, though. Arista stock has gained more than 50% so far this year, putting its market cap at $10 billion. "The price tag there may not be where it needs to be for HPE to go out there and make an acquisition," Zino suggested.

HPE and Arista declined to comment on potential deals.

Meg Whitman continues her HPE overhaul.
Meg Whitman continues her HPE overhaul.

Pure Storage (PSTG) , a rival to HPE and Nimble in the flash market, reported strong first quarter results last week. CEO Scott Dietzen said the company is winning more business from HPE-Nimble, Dell (EMC) and NetApp (NTAP) . 

The Deal suggested last November that companies with flash storage products such as Pure or Nimble could be a target for HPE. Whitman announced the purchase of Nimble in March.

"The Nimble acquisition kind of positioned them within the flash space," Zino said, suggesting that HPE would not likely make another storage purchase now. "They want to see how things go here on out."

Jim Cramer, founder of The Deal's parent, TheStreet, and manager of the Action Alerts PLUS portfolio, suggested that it may be time for Whitman to focus on running the business rather than reshaping it. "Looking ahead, we expect HPE to benefit from a growing cash balance and a cleaner business model, but we also recognize that management has to prove it can execute following a disappointing quarter where the organization's transformation was specifically highlighted as a reason for broader weakness," Cramer wrote. 

If HPE trims its balance sheet, focuses on higher margin businesses and does not reap the stock-market benefits of Whitman's restructurings, the company itself could become a target.

"You wonder if HPE continues to struggle and continues to be heavily discounted, is there someone who could look at the remaining HPE company as a potential acquisition?" Zino asked. "Private equity investors sitting out there may potentially see a name like this as an attractive investment."

Hewlett Packard Enterprise and DXC Technology are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells HPE and DXC? Learn more now.

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