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March 4, 2020, 8:14 a.m. EST

HPE shares drop on revenue miss, warning it no longer expects revenue to grow in fiscal 2020

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By Jon Swartz

Hewlett Packard Enterprise
HPE shares dipped after it reported first-quarter revenue that came up short of Wall Street estimates.

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.

$ 11.11
+0.63 +6.01%
Volume: 16.56M
June 5, 2020 4:00p
P/E Ratio
Dividend Yield
Market Cap
$13.46 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 47.83
+0.97 +2.07%
Volume: 22.59M
June 5, 2020 4:00p
P/E Ratio
Dividend Yield
Market Cap
$198.73 billion
Rev. per Employee
$ 50.52
+1.32 +2.68%
Volume: 4.16M
June 5, 2020 4:00p
P/E Ratio
Dividend Yield
Market Cap
$36.38 billion
Rev. per Employee
+81.58 +2.62%
Volume: 4.80B
June 5, 2020 5:07p

Jon Swartz is a senior reporter for MarketWatch in San Francisco, covering many of the biggest players in tech, including Netflix, Facebook and Google. Jon has covered technology for more than 20 years, and previously worked for Barron's and USA Today. Follow him on Twitter @jswartz.

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