HPE revenue drops for three quarters despite H3C support in China

Hewlett Packard Enterprise (HPE) revenue fell 7 percent to $7.22 billion in the fiscal third quarter, which ended July 31.
HPE revenue July quarter 2019
The US-based networking equipment company’s revenue has now declined year over year for three consecutive quarters.

HPE’s Intelligent Edge revenue was $762 million (–3 percent), with 4.9 percent operating margin. HPE Aruba product revenue fell 5 percent to $668 million. HPE Aruba Services revenue rose 16 percent year over year to $94 million.

HPE’s hybrid IT revenue was $5.5 billion (–9 percent), with 12.7 percent operating margin, up 250 bps year over year. HPE’s compute revenue fell 12 percent to $3.151 billion. HPE’s storage revenue dropped 5 percent to $844 million. Pointnext revenue dipped 6 percent to $1.554 billion.

HPE has strengthened its focus on higher-margin products with 2 percent growth in High-Performance Compute, 28 percent at Composable Cloud, and 4 percent at Hyperconverged Infrastructure.

HPE Nimble Storage revenue rose 21 percent year. HPE Pointnext operational services orders and Nimble services orders rose 3 percent.

HPE’s financial services revenue was $888 million, with 8.7 percent operating margin, up 90 bps year over year.

The majority of HPE’s revenue comes from its Hybrid IT business segment, which includes servers, storage and networking equipment for data centers.

Compute revenue, which represents more than half of Hybrid IT revenue and includes sales of servers, fell 10 percent in the quarter.

HPE has generated 41 percent of its quarterly revenue from Americas, 34 percent from EMEA and 23 percent from Asia Pacific including China and India.

HPE did not face turmoil in China due to its joint venture H3C in China. Cisco, one of the main rivals of HPE, recently said it is facing challenges in receiving orders from China in the wake of the China-US trade war.

Tarek Robbiati, HPE’s chief financial officer, told analysts: “HPE’s broad portfolio and global footprint makes us well diversified to handle choppy markets. We have also been able to successfully navigate all of the recent tariff increases on China exports that have been factored into our outlook.”

HPE executives disclosed sales execution issues one quarter earlier, with CEO Antonio Neri saying the company had taken steps to improve.

HPE made a one-time arbitration award to DXC, a company that was formed as HPE’s Enterprise Services Business spun out and merged with CSC in 2017. HPE announced its intent to buy supercomputing company Cray in a deal valued at around $1.3 billion. HPE expects the deal to close by the end of the 2019 fiscal year.

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