Shares of Hewlett Packard Enterprise Co. dipped 4% in after-hours trading Monday after the computing giant reported fourth-quarter revenue that fell short of analyst estimates. A major culprit: Longer sales cycles for bigger deals because of economic and geopolitical uncertainty, company executives said.
The San Jose, Calif.-based company reported net income of $480 million, or 36 cents a share, compared with a loss of $757 million, or 52 cents, in the year-ago period. Revenue declined 9%, to $7.22 billion from $7.95 billion a year ago.
HPE’s biggest business — Hybrid IT, which includes servers, storage and networking equipment for businesses’ data centers — declined 11% in year-over-year revenue to $5.67 billion, shy of the $5.74 billion estimated by FactSet analysts.
“I am confident in our ability to drive sustainable, profitable growth as we continue to shift our portfolio to higher-value, software-defined solutions and execute our pivot to offering everything as a service by 2022,” HPE Chief Executive Antonio Neri said in a statement following the results. “Our strategy to deliver an edge-to-cloud platform-as-a-service is unmatched in the industry.”
Analysts surveyed by FactSet had expected earnings of 35 cents a share on revenue of $7.4 billion.
HPE did reiterate financial targets for the current business year. It expects $1.01 to $1.17 a share in annual profit, or $1.78 to $1.94 on an adjusted basis. It projected $1.9 billion to $2.1 billion in free cash flow, with most of going into stock buybacks and dividend payouts. And HPE announced it closed its $1.3 billion acquisition of supercomputing company Cray Inc.
Although HPE’s fourth-quarter revenue was down, at least one analyst noted growth in strategic areas such as Composable Cloud (21%) and Aruba Services (17%).
“For HPE, I believe the future is all about its differentiation and execution in the hybrid cloud and everything-as-a-service, about which I am optimistic,” Patrick Moorhead, principal analyst at Moor Insights & Strategy, told MarketWatch in an email. “The industry is out of the drunken-sailor mode where everything was going to the public cloud or perish, and enterprises are more pragmatic in that many will keep a lot of data in an (on-premises) cloud model.”
HPE shares HPE, +1.93% are up 32% this year, compared to the S&P 500 index’s SPX, +0.75% 24.9% gain in 2019.
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