Financial Performance

HPE Has ‘Tough’ Quarter With 16% Sales Drop

CFO Tarek Robbiati attributed the revenue decline primarily to supply chain disruption, which resulted in “significantly higher” levels of backlog.
Matthew HellerMay 22, 2020
HPE Has ‘Tough’ Quarter With 16% Sales Drop

Hewlett Packard Enterprise shares dipped in after-hours trading Thursday after the computing giant reported a 16% drop in quarterly revenue, reflecting supply chain disruptions caused by the coronavirus pandemic.

HPE’s revenue for the second quarter declined to $6 billion from $7.1 billion in the year-ago period. Analysts had expected sales of $6.33 billion.

The company also posted a net loss of $821 million, or 64 cents a share. After adjustments for one-items, it earned 22 cents a share, missing estimates of 30 cents a share.

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“This was a tough quarter by every measure and I’m of course disappointed in the results, but I do not view our Q2 performance as a reflection of our capabilities, nor of the opportunity ahead of us,” CEO Antonio Neri said in an earnings call.

In the extended session Thursday, HPE shares fell 5.4% to $9.80, bringing the stock’s losses for the year to more than 39%.

CFO Tarek Robbiati attributed the revenue decline primarily to supply chain disruption, which resulted in “significantly higher” levels of backlog, particularly in HPE’s Compute, High Performance Compute, and Storage businesses.

“We also saw uneven demand with customers pushing out business activity as they navigated through the current economic crisis and lockdown,” he said.

According to Neri, HPE exited the second quarter with more than $1.5 billion in backlogs, representing two times the historical backlog. “Our team is doing everything we can to deliver on these customer orders,” he told analysts.

The difficult Q2 came as HPE continues to execute its shift from a traditional on-premise business model to a hybrid cloud strategy it calls IT-as-a-service. Neri said that despite the “challenging circumstances,” HPE Greenlake — the lynchpin of the cloud strategy — “gained traction” with 17% growth in annualized revenue run-rate to $521 million.

HPE also announced a cost optimization and prioritization plan that it estimates will yield gross savings of at least $1 billion by the end of fiscal 2022.

The plan is designed, among other things, to “drive increased efficiencies through investment in digitalization and automation” and “accelerate our pivot to as-a-service,” Robbiati said.

Marijan Murat/picture alliance via Getty Images

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