HPE CEO Whitman says everything's 'on the right track' as sales are literally decimated

And more than half the biz working overseas on the cheap

Meg Whitman

HPE's financial results for the first quarter of its fiscal 2017 are in, and they don't look good. Profits are flat and the servers, storage and networking divisions have shown double-digit declines in revenue.

Overall revenues for the company were down 10 per cent from the prior-year period, and several key divisions suffered serious losses. There were a few bright spots in the figures, but the stock market wasn't impressed and HPE's shares fell in after-hours trading.

"I believe HPE remains on the right track," said CEO Meg Whitman in a canned statement [PDF] on Thursday. "The steps we're taking to strengthen our portfolio, streamline our organization, and build the right leadership team are setting us up to win long into the future."

In a conference call with investors and analysts this afternoon, Whitman admitted the results were mixed but blamed a number of outside factors depressing growth. Chief among these were the strong dollar in comparison to the Euro, but Whitman also blamed tight NAND supply and rising DRAM pricing. She said that in the latter cases, prices would continue to rise in the future.

Here's the full rundown on the damage for the three calendar months to January 31, 2017. All figures are GAAP, since non-GAAP figures are basically Enron accounting:

  • Total revenue: HPE reported sales of $11.4bn in the past quarter, down 10 per cent year-on-year. Whitman noted that an unnamed tier-one customer had cut its purchasing, which had a big impact on revenues.
  • Net earnings: On profits, HPE banked $267m, largely the same figure as this time last year. A 1.1 per cent increase in margins helped maintain profitability despite declining revenues.
  • Earnings per share: HPE reported earnings per share of $0.16, up 7 per cent year-on-year.
  • Dividends and buybacks: Over the quarter, HPE spent $750m on share buybacks and payouts to investors. HPE's stock price has risen around $2 during the quarter.
  • Enterprise Group: This vitally important division of HPE showed revenue falling to $6.3bn, down 12 per cent over the year-ago quarter. Server revenues fell 12 per cent, storage was down 13 per cent, networking plummeted 33 per cent, and technology services saw revenues drop 2 per cent.
  • Enterprise Services: Division revenues fell 11 per cent year-on-year at $4bn for the quarter. Application and business services revenues fell 17 per cent while infrastructure technology outsourcing revenues were down 8 per cent.
  • Software: Software-as-a-service was the one bright spot in this division, with revenues up 4 per cent over last year's numbers. Other than that it was pretty dismal – licenses and support revenues both fell 9 per cent and professional services revenues fell 7 per cent. Overall the division saw revenues down 8 per cent at $721m.
  • Financial Services: Revenues in this division grew 6 per cent year-over-year to $823m, while the volume of financing fell 10 per cent and the portfolio assets rose 2 per cent over the same period.

There were some bright spots, Whitman said. High-performance computing revenues were up 30 per cent and the company had fixed some "execution issues." Notably, HPE now has new regional managers in place to kick the biz up a gear.

Costs are also being cut. The company reported that over 50 per cent of its staff are now located in low-cost countries, and the biz is on target to see that figure rise to the target of 60 per cent. Future pension outgoings have also been cut, Whitman said.

HPE's revenues for the quarter were $670m below analysts' estimates, although its earnings per share were on track. Its stock price is down 6.12 per cent in after-hours trading to $23.15. ®


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