HPE Projects Strong Profit on Continued Cost Cutting

Nico Grant (Bloomberg) -- Hewlett Packard Enterprise Co., a maker of server computers, raised its profit forecast for the year on greater cost-cutting measures, topping most analysts’ estimates.

Profit, excluding some items, will be $1.62 a share to $1.72 a share in fiscal 2019, an increase of 6 cents per share from the company’s outlook announced in February. Analysts, on average, projected $1.64.

Sales fell 4.3 percent from a year earlier to $7.15 billion in the period that ended April 30, the San Jose, California-based company said Thursday in a statement. Analysts projected $7.4 billion, according to data compiled by Bloomberg. Adjusted profit was 42 cents a share compared with analysts’ average estimate of 36 cents.

Chief Executive Officer Antonio Neri is trying to make the company a key hardware vendor for big-data needs, seeking to take advantage of technology trends from artificial intelligence to the internet of things. HPE said last week it would acquire Cray Inc., which makes high-performance computers used to process vast amounts of information, in a deal valued at $1.4 billion. What may prove more consequential is the U.S.-China trade war, which threatens to curb HPE’s revenue and raise some component costs.

HPE’s sales have contracted on a year-over-year basis every quarter but one since 2017, and Neri has been keen to reverse that trend -- betting $4 billion on edge computing, which lets clients process information on hardware far away from centralized data centers.

The company “demonstrated traction in critical areas for our customers that delivered strong margin improvement, EPS above our outlook and solid cash flow,” Neri said in the statement. “We continue to make important strategic moves that further enhance our competitive position and ability to better serve our customers in a hybrid world.”

Shares rose about 3 percent in extended trading after closing at $14.34 in New York. The stock has climbed 8.6 percent this year.