HPE Says Global 'Headwinds' Causing Revenue Decline

Global market challenges could last three to four quarters, CEO Meg Whitman said.

HPstorage1

The term "headwinds" has been a common part of Hewlett-Packard Enterprise's vernacular in recent years, especially when it comes to reporting earnings.

HPE's stock price fell an alarming 6.45 percent Feb. 23 after the Palo Alto, Calif.-based company reported another decline--10 percent year over year--in revenue and cut its earnings forecast for the 2017 fiscal year.

In her quarterly conference call to analysts and business journalists, CEO Meg Whitman cited one of her favorite phrases—"significant headwinds"—in describing increased international pressure on the corporation from the strengthening U.S. dollar, higher commodities pricing and "near-term execution issues."
HPE, which produces enterprise-grade data center hardware and software, reported adjusted earnings of 45 cents per share on revenue of $11.4 billion for its fiscal first quarter, resulting in net income of $267 million. Wall Street analysts had pegged HPE to bring in $12.07 billion in the quarter.

In Q1 12 months ago, HPE filed earnings of 41 cents per share on revenue of $12.72 billion.

"HPE's evolution remains in progress, as evidenced by its pending spin-merge transactions for non-core services and software assets with CSC and Micro Focus, as well as its pending acquisitions of hybrid cloud orchestration provider Cloud Cruiser and network security vendor Niara," research analyst Stephanie Long of Technology Business Research, Inc. wrote in a media advisory.

"In the face of strong competition and similar evolutions from Cisco, Dell Technologies and others, HPE faces a period of continued investment to ensure its long-term differentiation.

"The financial performance represents a 10 percent year-to-year decline. This reflects HPE's status as an incumbent vendor in a challenging market, with multiple internal and external challenges preventing top-line gains. For example, HPE's converged storage business--a large and mature piece of its overall storage business--experienced a 12 percent year-to-year revenue decline in C4Q16, inhibiting the vendor's ability to offset the impact of declining demand for legacy storage technologies," Long said.

These global market challenges could last three to four quarters, based on HPE's financial performance, those of its rivals and the supply chain, Whitman said.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he...