HPE hybrid IT revenue falls 11% triggering share slump

Company misses analyst estimates but remains optimistic for 2020

HPE missed analyst estimates in its fourth-quarter earnings report on Monday, largely driven by slowing demand for core products and wider economic uncertainty.

Shares slumped 4% in after-hours trading, prompted by a drop of 11% in the company's Hybrid IT division, by far HPE's largest unit comprising its servers, storage and data centre products. Revenue for the unit came in at $5.67 billion, just short of the $5.74 billion expected by analysts.

The company's Intelligence Edge unit, a field that HPE has aggressively targeted, also saw revenue slump by 6.5%, falling from $773 million to $723 million year over year.

In September, HPE CEO Antonio Neri warned that turbulent economic factors, including trade tensions, were creating "uneven demand" and would rattle customer confidence for some time to come.

Commenting on this week's earnings, he said: "We had a very successful fiscal year, marked by strong and consistent performance. Through our disciplined execution, we improved profitability across the company and significantly exceeded our original non-GAAP earnings and cash flow outlook, while sharpening our focus, transforming our culture and delivering differentiated innovation to our customers as they accelerate their digital transformations.

"I am confident in our ability to drive sustainable, profitable growth as we continue to shift our portfolio to higher-value, software-defined solutions and execute our pivot to offering everything as a service by 2022," Neri continued. "Our strategy to deliver an edge-to-cloud platform-as-a-service is unmatched in the industry."

There were some positive signs for the company. Quarterly profit was slightly higher than analyst estimates, earning 49 cents per share compared to the 46 cents per share that was anticipated, as reported by Reuters.

HPE also gave a positive outlook for the year ahead, estimating a $1.01 to $1.17 per share in profits and $1.78 to $1.94 per share in adjusted profits.

The earnings report brings to an end a year marked by a series of strategic acquisitions that will likely serve to further diversify HPE's earnings in 2020. In May the company acquired supercomputing giant Cray, a deal that came as somewhat of a surprise but will certainly lead to more developments in its high-performance computing division.

HPE also acquired the intellectual property of big data analytics specialist MapR in August. This deal included a bunch of AI technology and expertise that HPE said would be put towards its Intelligent Data Platform.

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