Double dose of good news for HP’s split businesses

Quarterly results suggest Hewlett Packard Enterprise and HP Inc. are both on the right track

PALO ALTO » Whether it’s a symbol of the end of the Meg Whitman era, or the start of the reign of Antonio Neri, Hewlett Packard Enterprise got on the good side of Wall Street Thursday with betterthan- expected quarterly results, and plans to return billions of dollars to shareholders due to recent federal tax reforms.

HPE’s former business brother, HP Inc., was also having a good day following its own set of upbeat first- quarter results.

In its first quarterly report since Whitman stepped down as HPE’s chief executive Feb. 1, the business-technology giant turned in a first- quarter profit, excluding one-time items, of 34 cents a share, on $7.7 billion in sales, comparedwith earnings of 28 cents a share on revenue of $6.9 billion in the same period a year ago. (HPE adjusted its year-ago sales to reflect the spinoff of its software business last year.)

Those results blew past the estimates of Wall Street analysts, who had forecast HPE to earn 22 cents a share on$7.1 billioninrev-

enue. The results gave HPE a huge boost in after-hours trading, as shares surged 12 percent, to $18.35.

“( This is) proof we have the right strategy and execution,” said Neri, on a conference call to discuss HPE’s results. “We have the strongest (product) portfolio we have had in years.”

Neri, a longtime HPE executive who became CEO after Whitman’s departure, cited her “tremendous leadership” in getting HPE to where it is now. Whitman remains on HPE’s board of directors.

It was a good quarter across the board for HPE’s various business segments, with revenue from server sales rising 11 percent from a year ago. Storage revenue climbed 24 percent and sales of data center networking gear were up by 27 percent over the same period.

“( They) had a blowout quarter,” said Patrick Moorhead, president and principal analyst atMoor Insights and Strategy. “If this is what HPEwill look like under new CEOAntonio Neri, investors, customers, partners and employees will be pleased.”

HPE also said it would raise its quarterly dividend payment by 50 percent, from its current payment of almost 8 cents a share, would return $7 billion to shareholders by the end of the year through dividends and stock repurchases, and would increase its contributions to employee retirement plans due to the effects of the recently passed tax reform package.

HP, which took over the personal computer and printing operations from the former Hewlett-Packard when that company split in two in late 2015, was also pleasing investors following its first- quarter results. HP reported earnings of 48 cents a share, excluding one-time items, on revenue of $14.5 billion, up from a profit of 38 cents a share on $12.7 billion in sales during its 2017 first quarter.

“We’re playing our own game,” said HP CEO Dion Weisler, on a separate conference call. “We’re building the business for the long term.”

When HP and HPE went their separate ways more than two years ago, many industry watchers thought HP would stumble, or possibly get acquired by a rival, as PCs were viewed as an industry in decline.

But even if the PC market hasn’t returned to solid, consistent growth—technology research firm Gartner said worldwide PC sales fell 2.8 percent in 2017 from 2016’s levels — HP has shown signs of growing its piece of the PC market. HP said PC sales rose 15 percent in the first quarter froma year ago, to $9.44 billion, while total PC units shipped increased 7 percent.

Printing revenue also remained strong, rising 14 percent over last year’s first quarter, to $5.08 billion. HP said sales of both printing hardware and supplies, and of printers for consumers and businesses, all increased from a year ago.

“Their double digit growth in two markets that were thought to be in decline is nothing short of amazing,” said Rob Enderle, president of tech research firm the Enderle Group. “This is especially interesting given HP was thought, at the split, to be a lost cause.”

In after-hours trading, HP’s shares climbed more than 5 percent, to $22.50, following the release of its results.