Why HPE’s 3% revenue growth does indicate revival of business

HPE Q3 FY17 mix by segment and regionHewlett Packard Enterprise (HPE) recently announced its financial results for its fiscal 2017 third quarter, ended July 31, 2017.

HPE’s third quarter revenue rose 3 percent to $8.2 billion – mainly driven by acquisitions done by the technology giant in the recent past. Margin is a big concern for HPE that competes with tech giants such as IBM, Dell, Cisco, Oracle, among others.

“The results of the third quarter are an encouraging sign of the progress we are making,” said HPE CEO Mag Whitman. “With better execution we drove overall revenue growth, exceeded our EPS targets and improved our operating margins sequentially, all while completing the spin-merge of our Software business. There’s more work to do, but we are on the right track.”
HPE Regional revenue trends from continuing operationsHPE has generated revenue of $6.8 billion (+3 percent) from enterprise group with main segments such as Storage +11 percent, Networking +16 percent and Technology Services +1 percent growth and Servers dropping — 1 percent.

HPE generated revenue of $718 million (–3 percent) from software business with a 24.9 percent operating margin with license revenue growing 2 percent and support revenue dipping 2 percent in Q3.
HPE Enterprise Group Q3“The three percent increase in revenue can be attributed to HPE’s efforts in laying the groundwork for success, as it finalized the spin-merges of many of its software assets and Enterprise Services while making strategic acquisitions including that of Niara, SimpliVity, Nimble and, most recently, the pending acquisition of Cloud Technology Partners,” said Stephanie Long, research analyst at TBR.

HPE has experienced margin declines year-to-year in an increasingly commoditizing infrastructure market.
HPE Software Q3TBR said HPE’s recent acquisitions have reinforced positive performance for Enterprise Group (EG) as storage and networking increased revenue year-to-year and EG achieved an operating margin of 9.3 percent in the quarter.

This positive revenue performance is counter to market trends and is largely due to inorganic revenue increases from acquisitions.

HPE achieved storage revenue growth due in part to 30 percent year-to-year gains in HPE’s all-flash portfolio, which includes Nimble Storage assets, while HPE’s networking business continues to reap the positive rewards of its Aruba business, reinforced by its Niara buy.

HPE’s server business was hindered by ongoing declines in Tier 1 sales, but this was partially offset by increases in blade server sales, resulting in 1 percent revenue declines for the quarter. HPE noted on its earnings call that the increases in blade server sales are due in part to customers purchasing blades to become “synergy ready.”

Baburajan K

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