HPE Revenue Increase Comes After Trimming Costs

Hewlett Packard Enterprise has emerged from its aggressive slimming down efforts, reporting quarterly sales that were stronger than had been expected on strong demand for storage gear and servers that help in data centers’ operations.

Revenue was up 2.5% to end HPE’s fiscal third quarter at $8.2 billion which marked the first time in the last five quarters the tech company beats sales estimates on Wall Street. HPE’s adjusted profit came in at 30 cents per share.

CEO Meg Whitman facing strong competition from providers of cloud computing has spent most of the last year trimming down the company, in an attempt to make it responsive to its key markets.

The process started with the company’s split from HP, the computer and printer maker near the end of 2015, and has continued through this year by separating from large software and services businesses.

Overall, the revenue is nice to see as its core business moves to new growth, said one Wall Street analyst following the release of the earnings report.

In extended Tuesday trading, shares of HPE were up 5.8% and the stock thus far has gained over 4.4% for the year.

Our profit excluding certain costs will be between 26 cents and 30 cents per share during the current quarter, said a prepared statement from the company.

HPE reduced its outlook for the fiscal year due to its separation from the software business. Adjusted profit per share is now expected to be between $1.36 and $1.40.

An analyst in the industry said the increase in sales will help to alleviate any concerns by investors on viability.

Revenue for its storage business was up 11% for its fiscal third quarter that ended on July 31. Servers’ sales – the engine for computing in data centers, were down 1%. Revenue from its networking business was up 16%.

One a call with analysts, CEO Whitman said HPE was benefiting from the increased demand in key areas of its business, including for servers. She is also pushing to eliminate the layers in the business and be more efficient.

Whitman added that with fewer overall lines of business and clearer strategic priorities, HPE has the opportunity to create an operating model and internal structure that is nimbler, faster and simpler.

CFO Tim Stonesifer told analysts that the company has targeted $1.5 billion in savings over a period of three years.

While the company’s focus has narrowed, Whitman continues to make acquisitions, including buying Cloud Technology Partners on Tuesday.

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