By Jon Swartz
Hewlett Packard Enterprise
Hewlett Packard Enterprise Co. shares fell more than 6% in after-hours trading Tuesday after the technology giant reported first-quarter revenue that did not meet Wall Street estimates and warned it no longer expects revenue to grow in fiscal 2020.
In a phone interview shortly after the results were released, HPE Chief Financial Officer Tarek Robbiati highlighted gains in intelligent-edge computing (up 2% year-over-year to $720 million) and operating profit margin for its storage business (up to 18%). But he blamed a 16% year-over-year decline in compute revenue ($3 billion) and 9% decline in total revenue on “microenvironment” issues such as supply-chain disruption, and coronavirus.
“There are too many unknowns at this time to predict the impact on the second quarter,” Robbiati said.
HPE /zigman2/quotes/201998588/composite HPE +6.01% , which provided more financial detail than usual for its business segments, said its storage business fell 8% to $1.25 billion.
Overall, the company reported net income of $333 million, or 25 cents a share, in the quarter, compared with net income of $177 million, or 13 cents a share, in the year-ago first quarter.
Revenue dipped nearly 9% to $6.95 billion, from $7.55 billion a year ago.
Analysts surveyed by FactSet had expected net income of 24 cents a share on sales of $7.21 billion.
The wobbly results could signal a “rough ride” for tech giants this year, Forrester analyst Glenn O’Donnell cautioned in an email to MarketWatch. “HPE, Dell, and Cisco /zigman2/quotes/209509471/composite CSCO +2.07% need to continue to package their technology offerings as complete tech platforms,” he wrote. “I believe the days of standalone servers and storage are in a point of low returns and slow decline.”
The performance of HPE’s server business continues to intrigue Wall Street. Barclays Capital Inc. analyst Tim Long expected server revenue to decline 5% to $3.2 billion year-over-year and be flat sequentially. “Given Dell’s /zigman2/quotes/203822527/composite DELL +2.68% weaker server revenue for Jan-Q and tough market demand, we see some downside risk to our estimate,” Long wrote in a note Tuesday. “Near-term outlook may also be negatively impacted by Covid-19. That said, the server market in CY2020 seems to have a good chance of recovery back to a growth mode after a tough 2019.”
HPE shares were down 3% in premarket trade Wednesday and are down 22% in the past year, while the broader S&P 500 index /zigman2/quotes/210599714/realtime SPX +2.62% is up 7.6% over the past 12 months.