No silver lining in the cloud for HP Enterprise as revenues slump 10pc

24 Feb 20176 Shares

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HP Enterprise sign. Image: Denis Linine/Shutterstock

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HP Enterprise is finding it tough in the competitive sector as its latest earnings report show its revenues have slumped by 10pc.

Things have gone from bad to worse for HP of late, particularly within its hardware division. Management recently confirmed plans to cut 3,000-4000 jobs between 2017 and 2019 as part of a $500m restructuring drive, including 500 at its Irish plant.

In the HP Enterprise (HPE) division that focuses on software and cloud applications, warning signs have presented themselves within its latest quarterly earnings report.

What went wrong

In its letter to investors, HPE said that as a result of increased competition and the dollar being particularly strong, it will need to cut its full-year forecast.

Having previously forecasted between $2 and $2.10 per share, HPE has now scaled this back to between $1.88 and $1.98 per share, according to Reuters.

Meanwhile, its overall revenues for the year slumped by 10.4pc to $11.41bn – far below the market estimate of $12.07bn, with a price of $2.05 per share.

Projected profits per share were also scaled back for the year to between $0.41c and $0.45, compared with the market estimates of $0.47.

Within HPE, the biggest hit was seen in its cloud storage and networking applications, with revenue dropping 12pc to $6.32bn in the latest quarter.

Speaking of the downturn, HPE said that a higher cost for commodities and “near-term execution issues” resulted in some less-than-beneficial financial returns.

HPE ‘remains on the right track’

In a conference call following the publishing of the earnings report, HPE president and CEO Meg Whitman said low demand also contributed to its poor showing this quarter.

“We saw significantly lower demand from one customer and major tier-one service provider facing a very competitive environment.”

In her letter to investors, Whitman was noticeably more optimistic about HPE’s chances of turning things around.

“I believe HPE remains on the right track,” she said.

“The steps we’re taking to strengthen our portfolio, streamline our organisation and build the right leadership team, are setting us up to win long into the future.”

HP Enterprise sign. Image: Denis Linine/Shutterstock

Colm Gorey is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com