Hewlett Packard Enterprise Raises Shareholder Return Target to $7 Billion Under New CEO
23 February 2018 - 11:02AM
Dow Jones News
By Maria Armental
Rising sales of storage and networking devices powered Hewlett
Packard Enterprise Co.'s core business during the holiday quarter,
helping the company raise its annual profit targets while boosting
planned returns to shareholders.
The Silicon Valley company, born from the 2015 split of
Hewlett-Packard, also saw profit rise fivefold in its fiscal first
quarter, helped by the U.S. tax overhaul.
Hewlett Packard Enterprise plans to lift its dividend by 50% in
its third quarter and buy back more than $5.5 billion of its stock
through the end of its fiscal 2019, targeting a return of about $7
billion to shareholders. The announcement Thursday from Chief
Executive Antonio Neri, who has been in the role since Feb. 1,
comes as several tech companies have revealed their plans in recent
weeks on how they plan to spend cash currently held abroad.
HPE also said it would significantly increase its contribution
to workers' 401(k) retirement plans and set some money aside for
employee degree-assistance programs.
Investors had been looking for signs of what HPE intended to do
with its cash, which stood at $7.67 billion as of Jan. 31, and sent
the company's shares up 11% to $18.16 in after-hours trading.
Shares in HP Inc., the other half of the iconic company founded
in 1939 in a Palo Alto, Calif., garage, rose 5.2% after hours as
the printer and personal-computer maker raised its annual outlook
and said the U.S. tax-law changes could result in "near-term
shareholder return opportunities." The company, which also reported
first-quarter results Thursday, showed double-digit revenue growth
in both its printing and computer businesses.
HPE CEO Mr. Neri, a longtime veteran of the company, is filling
a role left by Meg Whitman, who has described him having a deep
business-to-business enterprise technology background.
Ms. Whitman's tenure at Hewlett-Packard was marked by a series
of sales and splits that reshaped the storied company. Mr. Neri, a
trained engineer, rose through the ranks to run the servers and
networking business.
On Thursday, Mr. Neri said he was focused on establishing a new
culture as part of HPE's latest transformation, "and to really
architect the company from the ground up with a clean sheet
approach."
Mr. Neri is also charged with executing HPE Next, a three-year
plan announced in June that calls for at least $750 million in net
cost-savings, including about $250 million this year.
Asked Thursday if company spending plans included large mergers
and acquisitions, Mr. Neri said that while HPE intends to focus on
innovation and partnerships, it would be open to a deal "if there's
an opportunity there with the right valuation."
Over all, HPE's first-quarter profit was $1.44 billion, or 89
cents a share, compared with $267 million, or 16 cents a share, a
year earlier. Excluding one-time items, HPE earned 34 cents a
share.
Revenue rose 11% to $7.67 billion.
Analysts surveyed by Thomson Reuters had expected 22 cents a
share in adjusted profit and $7.07 billion in revenue.
Data-center networking and storage revenue, part of its hybrid
IT segment, rose 27% and 24%, respectively, in the latest
period.
HPE raised its annual adjusted per-share profit target by 20
cents to a range of $1.35 to $1.45 a share. For the current
quarter, HPE expects to earn between 29 cents and 33 cents on an
adjusted per-share basis, which came in ahead of analysts'
expectations.
--Austen Hufford contributed to this article.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 22, 2018 18:47 ET (23:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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