HPE Gives Bullish Forecast on Stronger Internet Gear Sales

Ian King (Bloomberg) -- Hewlett Packard Enterprise Co. gave a bullish forecast for the current quarter, helped by increasing demand for equipment needed to run computing services and manage devices over the internet.

Profit, excluding some items, will be 38 cents to 44 cents per share in the three months ending in April, the Houston-based company said Thursday in a statement. Analysts, on average, estimated 38 cents, according to data compiled by Bloomberg. Annual profit will be from $1.70 to $1.88 a share, compared with an average estimate of $1.69.

Like many of its peers, HPE is trying to shift away from a reliance on one-time sales of servers, networking equipment and storage hardware and sign up customers to subscriptions with add-on services. Chief Executive Officer Antonio Neri needs that transition to accelerate to return the company to revenue growth, which has been largely absent since its 2015 split with HP Inc. He’s been cutting costs to make the company more profitable and last December announced the once-iconic Silicon Valley name would move its headquarters to Texas.

Demand for some types of computer services, particularly those provided over the internet, has risen during the Covid-19 pandemic. That’s driving orders of gear needed to support work and study from home, HPE said. Overall, the company is confident it can achieve its long-term revenue growth target of from 1% to 3%, Neri said in an interview.

“We’re starting to see the recovery in demand in IT spend,” he said. “We see signs of stabilization in the core business.”

Unlike other electronics makers, HPE is not being hampered by shortages of semiconductor components, he said.

Shares gained about 1% in extended trading after closing at $14.50 in New York. The stock has jumped 22% this year.

HPE’s revenue declined 1.7% to $6.83 billion in the three months ended Jan 31. Net income in that fiscal first-quarter declined to $223 million, or 17 cents a share, from $333 million, or 25 cents a share, in the same period a year earlier.

By division, its biggest source of revenue, Compute, suffered a 1% decline in sales to $3 billion. Storage revenue fell 5% to $1.2 billion. Sales in the Intelligent Edge unit -- devices used to connect and manage previously unconnected gear -- rose 12% to $806 million.