Hewlett Packard Enterprise Profit Sinks
23 November 2016 - 9:10AM
Dow Jones News
Hewlett Packard Enterprise Co. capped its first year as an
independent company by posting lower quarterly profit and revenue,
the latest evidence that corporate technology demand remains
tepid.
The company, one of two created by the breakup of
Hewlett-Packard Co. a year ago, said net income in its fourth
fiscal quarter fell 78% on a 7.2% revenue decline.
HP Enterprise also projected earnings for the current quarter
that were mostly below projections on Wall Street.
HP Enterprise, based in Palo Alto, Calif., now sells a broad
line of hardware, software and services aimed at corporate buyers.
But Chief Executive Meg Whitman, who pushed for the breakup, has
moved aggressively to dispense with major businesses to focus on
servers, networking and data storage hardware.
In May, for example, HP Enterprise agreed to spin off a
100,000-employee computing services business and merge it with
operations of Computer Sciences Corp. In September, the company
announced plans for an $8.8 billion deal to spin off and merge most
of its software operations with Britain's Micro Focus International
PLC.
Ms. Whitman's strategy to narrow her company's focus runs
counter to the path forged by longtime rival Dell Inc., which in
September became substantially larger by completing the largest
acquisition in high-tech history—buying data storage pioneer EMC
Corp. for $60 billion.
The increased emphasis on data center hardware comes as demand
for some product categories has been weak lately. Rival Cisco
Systems Inc. last week reported that sales of its flagship
switching systems declined 7%, while sales in the unit that
includes servers slid 3%.
HP Enterprise said server revenue declined 7% in the fourth
quarter. Storage revenue fell 5%, while networking revenue declined
34%.
While boosting revenue growth has been an uphill battle, HP
Enterprise's stock has risen 50% in 2016 because of moves to share
its steady cash flow with investors through dividends and stock
buybacks. The company said its cash flow from operations rose 44%
to $2.2 billion in the fourth quarter.
"During our first year as a stand-alone company, HPE delivered
the business performance we promised," Ms. Whitman said.
HP Enterprise reported net income for the fourth period ended
Oct. 31 of $302 million, or 18 cents a share, compared with profit
in the year-earlier period of $1.39 billion, or 75 cents a share.
Revenue declined to $12.48 billion from $13.45 billion.
On an adjusted basis that excludes restructuring charges and
other one-time items, HP Enterprise put fourth-quarter earnings per
share of 61 cents. The company in September had projected a range
of 58 cents to 63 cents a share, while analysts polled by FactSet
had predicted per-share profit of 60 cents on revenue of $12.79
billion.
Fur the current quarter, HP Enterprise said it expects to report
adjusted earnings per share of 42 cents to 46 cents. Analysts'
average estimate was 46 cents, according to FactSet.
HP Enterprise met a prior estimate that it would report adjusted
per-share earnings for fiscal 2016 of $1.90 to $1.95, landing the
figure at $1.92. It also reaffirmed a prediction in October that
per-share earnings for fiscal 2017 will be $2.00 to $2.10,
excluding the impact of pending divestitures.
Write to Don Clark at don.clark@wsj.com
(END) Dow Jones Newswires
November 22, 2016 16:55 ET (21:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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