HPE Says Storage, Networking Gear Sales Rising

Brian Womack (Bloomberg) -- Hewlett Packard Enterprise Co. is emerging from an aggressive effort to slim down with promising prospects and stronger-than-projected sales.

Revenue rose 2.5 percent to $8.2 billion in the fiscal third quarter, marking the first time in five quarters the business technology provider beat analysts’ sales estimates. Customers are buying more storage and networking gear while server demand was down slightly, the Palo Alto, California-based company said Tuesday in a statement.

In the face of competition from cloud computing providers, Chief Executive Officer Meg Whitman has spent much of the past two years shrinking her company, trying to make it more nimble and responsive to key markets. That process began with the split from the maker of printers and computers in late 2015, and continued this year by separating from its large services and software businesses. Already, she can point to steadier demand for the remaining products.

The sales increase “will help alleviate investor concerns on the viability” of the reshaped company, said Shannon Cross, an analyst at Cross Research.

Shares rose as much as 5.8 percent in extended trading after closing at $14.04 in New York. The stock has gained 4.4 percent this year.

Related:HPE and VMware Team Up on Composable Infrastructure, Hybrid Cloud

Profit excluding some costs will be 26 cents to 30 cents a share in the current quarter, Hewlett Packard Enterprise said in the statement. The company reduced its fiscal year outlook to account for the separation of the software business, saying adjusted profit will be $1.36 to $1.40 a share.

Revenue in the storage business rose 11 percent in the period ended July 31. Sales of servers -- the computing engine for data centers -- declined 1 percent. Networking business revenue rose 16 percent, Hewlett Packard Enterprise said.

Adjusted profit was 30 cents per share during the quarter compared to projections of 26 cents, according to data compiled by Bloomberg.

While narrowing the company’s focus, Whitman has kept making acquisitions. Earlier on Tuesday, Hewlett Packard Enterprise announced it would buy Cloud Technology Partners, which helps businesses transition some of their applications to providers such as Amazon.com Inc.’s Amazon Web Services.

The planned purchase follows other deals in the past year, including the acquisition of Nimble Storage -- valued at about $1 billion and adding to Hewlett Packard Enterprise’s lineup of products that help customers with data storage. Whitman said in June that deals were set to “become a bigger part of our strategy.”

Whitman’s leadership of the company has come under scrutiny. In June, Hewlett Packard Enterprise stirred speculation about succession planning after it promoted Antonio Neri -- a longtime executive -- to the role of president. Whitman has said in the past it will take five years to turn around the company, which she took over after the ouster of Leo Apotheker in 2011.

That speculation was only heightened when Whitman was said to be a candidate to take the CEO role at Uber Technologies Inc. She publicly withdrew from consideration via a Twitter post, but then her name resurfaced last month as a leading candidate. Ultimately, Uber last week chose Dara Khosrowshahi, then Expedia Inc.’s CEO, for its top job.