HPE revenue dips 8% dues to supply issues and manufacturing constraints

Hewlett Packard Enterprise (HPE) announced financial results for its fiscal 2020 first quarter, ended Jan. 31, 2020.
HPE revenue dropped 8 percent to $6.9 billion. Market uncertainty, supply constraints, and North America manufacturing capacity constraints impacted revenue in Q1, particularly in Compute.

HPE GreenLake services’ orders grew 48 percent. HPE GreenLake gained 65 new logos in Q1 and has surpassed 800 total customers.

The outbreak of the coronavirus at the end of January impacted component manufacturing resulting in higher quarter and backlogs.

HPE encountered a challenge in consolidating a manufacturing site in North America.

“HPE’s first quarter results demonstrate continued progress against our strategic priorities to shift our company to higher-margin and more recurring revenues against a dynamic market backdrop,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise.

“While our overall revenue declined for the quarter, primarily due to our Compute business, we grew our ARR by 19 percent and saw profitable growth in key areas of investment, including Intelligent Edge, High Performance Compute, Hyperconverged Infrastructure, Big Data Storage and Operational Services orders,” Antonio Neri said.

Intelligent Edge revenue rose 4 percent to $720 million, with 9.7 percent operating margin, up 630 basis points from the prior-year period. Enhancements to North America sales leadership and go-to-market segmentation are paying off with double-digit growth in North America and 13 percent growth in overall WLAN product.

Compute revenue fell 15 percent to $3 billion, with 9.5 percent operating margin, flat from the prior-year period. Revenue was pressured this quarter due to uneven business conditions, component supply constraints and North America manufacturing capacity constraints.

High Performance Compute & Mission Critical Systems (HPC & MCS) revenue rose 6 percent to $823 million, with 6 percent operating margin, down 660 basis points from the prior-year period. HPC business continues to gain momentum with over $2 billion of awarded business expected to be delivered by FY23.

Storage revenue fell 7 percent to $1.3 billion, with 18.1 percent operating margin, down 60 basis points from the prior-year period. Hyperconverged Infrastructure revenur rose 6 percent and Big Data grew 45 percent.

Advisory & Professional Services (A&PS) revenue was $243 million with –0.8 percent operating margin. HPE said A&PS is a strategic business that pulls through significant infrastructure and operational services sales.

Financial Services revenue dropped 6 percent to $859 million, with 8.5 percent operating margin.

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