HPE reports dismal performance due to poor demand in Americas and China

Hewlett Packard Enterprise (HPE) has reported another dismal performance – under CEO Antonio Neri – for the second quarter, ended April 30, 2019.
HPE for CIOs
HPE reported revenue of $7.2 billion (–4 percent) with operating margin increasing to 6.1 percent from 4.9 percent.

HPE shifted to the mix of higher value solutions and achieved improvement in profitability across the board. HPE’s gross margin of 32.2 percent expanded 200 basis points year-over-year.

HPE generated revenue of $666 million (–6 percent) from Intelligent Edge and $5.6 billion (–4 percent) from Hybrid IT.

“We grew in key businesses, including storage, high-performance compute, compostable cloud, Aruba services and GreenLake orders,” HPE CEO Antonio Neri said during an analyst call.

HPE faced declines in Tier 1 sales and sales into China. Antonio Neri said trade tensions are creating uncertainty. HPE also recently experienced an elongation in sales cycles with some customers.

HPE revenue

Americas (–7%)
EMEA (+1%)
Asia Pacific (+1%)

HPE segment

Intelligent Edge revenue — $666 million (–6%)
HPE Aruba Product –8%
Hybrid IT — $5.6 billion (–4%)
Compute (–5%)
Storage (+3%)
HPE Pointnext (–7%)
Nimble services (+1%)

HPE’s Intelligent Edge revenue touched $666 million (–6 percent) despite solid growth in EMEA and APJ. HPE’s Intelligent Edge business team experienced unexpected execution issues and changes in market dynamics. HPE faced uneven execution in North America, mainly driven by current sales coverage model.

HPE has signed a deal with CNS Wholesale Grocers, the largest wholesale grocery supply company in the United States, with 14,000 stores in 50 locations. CNS selected Aruba wireless solutions to address its network and security needs.

McKesson Corporation, a global healthcare leader currently ranked six on the Fortune 100 will be deploying Aruba’s wire and wireless infrastructure., Amherst College is updated its entire campus network with Aruba’s solutions.

HPE’s Hybrid IT revenue touched $5.6 billion (–4 percent) despite achieving growth of 5 percent in storage, 25 percent in high performance compute, 25 percent in hyper converged, and 78 percent in compostable cloud business.

“Our ability to offer all of this technology as a service is a key differentiator for HPE. We are the only company on the market that can provide a true consumption driven offerings in a hybrid cloud environment,” Antonio Neri said.

HP GreenLake is a key element of HPE’s push towards subscription based revenue, which also includes Aruba services, and other software defined solutions. GreenLake recorded its largest quarter ever, with orders that grew 39 percent.

HPE won a significant technology and services deal with electrical utility company, Southern California Edison as they upgrade all their customer facing applications.

Aruba product revenue fell 7 percent due to the execution issues in North America and longer sales cycles at some customers.

HPE said its Intelligent Edge business is launching its next generation of Wi-Fi 6 products that are just beginning to sell into the installed base and will ramp more significantly in the upcoming quarters.

Rajani Baburajan