Hewlett Packard Enterprise Gives Upbeat 2019 Profit Forecast

Olivia Carville and Nico Grant (Bloomberg) -- Hewlett Packard Enterprise Co. gave an earnings forecast for fiscal 2019 that beat some analysts’ estimates, signaling the computer server maker’s drive into new areas will boost customer demand.

Adjusted profit is projected to be $1.51 to $1.61 a share, the Palo Alto, California-based company said Wednesday during an analyst meeting at the New York Stock Exchange. Analysts on average were predicting profit of $1.58 a share in 2019, according to data compiled by Bloomberg.

HPE’s chief financial officer, Tarek Robbiati, said the company expects positive revenue growth through 2019, with operating profit and cash flow increasing "significantly" compared with 2018. The company expects to double its free cash flow by 2020, Robbiati said.

In August, HPE released better-than-expected earnings for the fiscal third quarter. It’s scheduled to report fourth-quarter results next month.

Chief Executive Officer Antonio Neri has sought to diversify HPE into faster-growing businesses. The company’s networking and services arms have shown traction, but they remain too small to meaningfully impact the company’s overall performance. Neri has also abandoned unprofitable segments, cut costs and increased dividends and share buybacks to please investors. But the efforts can’t mask the fact that in HPE’s main business of servers and data storage, rival Dell Technologies Inc. has generated rapid sales growth this year, increasing pressure on Neri.

Looking forward to 2019, Neri said HPE plans to shrink its global footprint by withdrawing from 74 countries and decreasing its manufacturing locations to seven from 17. This will let the company streamline its supply chain, unite its inventory and focus on accelerating growth in the "intelligent edge," Neri said. The intelligent edge is a catchall phrase the company uses for hardware and software that can analyze data from sensors, cameras and other internet-connected devices in the field, rather than in a data center.

"The edge is where the action is; it’s where the data is being created," Neri said at the analyst meeting. "Ultimately, we see this new emerging world where there will be millions of clouds -- small-sized clouds and big clouds -- connected. Every edge to every cloud."