Sales fall short at HPE.
Whitman says HPE will be facing several ‘challenging’ factors as fiscal first-quarter report shows 10 percent decline from year ago
PALO ALTO — Hewlett Packard Enterprise said Thursday that its fiscal first-quarter sales fell 10 percent from a year ago as the tech giant saw big declines in its bellwether servers and data-storage businesses.
And things might not get much better soon as Chief Executive Meg Whitman said the company is seeing “several factors that will be more challenging” as the year goes on.
After the stock market closed, HPE said that for the quarter ending Jan. 31, it earned 16 cents a share on revenue of $11.41 billion, compared with a profit of 15 cents a share on $12.72 billion in sales a year ago. Excluding one-time items, HPE earned 45 cents a share.
HPE’s adjusted earnings managed to top the 44-centsa-share estimate forecast by analysts in a Thomson Reuters survey. However, the company’s sales fell short of analysts’ expectations of $12.07 billion.
Speaking on a conference call to discuss HPE’s results, Whitman said that among the issues hitting the company’s results are increased pressure from foreign exchange rates, higher prices of some commodity products such as DRAM memory, and some near-term execution issues.
“There are real pressures, no question about it,” Whitman said, before adding that she didn’t think those issues were any different than what HPE has dealt with before.
HPE took over much of the corporate computing business of the old Hewlett-Packard when that company split in two in 2015. For HPE, that includes traditional backroom gear such as servers and storage products.
And during its first quarter, those key businesses left much to be desired.
Server revenue fell 12 percent from a year ago to $3.1 billion, while storage sales declined by 13 percent to $730 million. Other major enterprise business areas also retreated, with technology services slipping by 2 percent to $1.94 billion and networking revenue falling 33 percent to $549 million.
The company also cut its earnings outlook for its full fiscal year by 12 cents a share. HPE now estimates it will earn between $1.88 a share and $1.98 a share for the year.
The combination of weaker sales and expectations of lower earnings hit HPE shares in after-hours trading. Investors drove HPE shares about 6.5 percent lower to $23.06 as of 4:05 p.m. PST, after the company’s report.
Despite the disappointments HPE reported, Whitman said, “I remain very confident in our strategy,” and that she believes HPE is ahead of many competitors in restructuring to position for future growth.
Yet Rob Enderle, president of technology research firm the Enderle Group, wasn’t sold on Whitman’s optimism.
“They will likely need another turnaround to recover from Whitman’s efforts,” Enderle said. “Whitman’s comments about ‘being on the right track’ are clearly out of line with these results and suggest they need a new engineer.”