Hewlett Packard Enterprise Co (NYSE: HPE) fell to the quarterly loss in the second quarter of FY 17 ended April 30 majorly due to tax-related expenses associated with the sale of HPE’s technology services business to Computer Sciences. Further, HPE has reported a steep fall in revenue from its biggest business (enterprise group division) that sells servers, networking, nd data storage equipment to companies, due to the subdued demand and a strong dollar. As a result, the stock is trading weak today and lost over 5.8% (As of 1:37PM EDT on June 1st, 2017; Source: Google finance).
The revenue in Hewlett Packard Enterprise group division, fell 13 percent in the second quarter, marking the steepest decline since the company was created in 2015 from the breakup of Hewlett-Packard Co. However, HPE has inked a string of deals to sharpen its focus on the enterprise group business, that generates about 62 percent of total revenue. The company has sold its consulting and outsourcing services unit and signed a deal to sell its software division. Last month, the company had bought data storage provider Nimble Storage Inc for about $1 billion. Overall, HPE in the second quarter of FY 17 has reported a net loss of $612 million, compared to a profit of $320 million, a year earlier.
Moreover, Hewlett-Packard servers revenue has fallen 14 percent in the second quarter while the networking revenue has plunged 30 percent. The demand for servers has slowed in recent months as companies increasingly buy non-branded servers that are assembled together, and cost less than machines sold by HPE and peers, including Dell Technologies and IBM. Hewlett Packard profit margins are affected due to the stiff pricing competition as well as higher commodities costs.
Meanwhile, Hewlett Packard in the second quarter of FY 17 has reported the adjusted earnings per share of 35 cents, which is in line with the analysts’ estimates for the adjusted earnings per share of 35 cents. The company had reported the adjusted revenue growth of 9.9 percent to $2.48 billion in the second quarter of FY 17, beating the analysts’ estimates for revenue of $9.75 billion. During the same period a year ago, HPE had earned 42 cents a share on $12.71 billion in sales.
Hewlett Packard for the FY 17, expects the adjusted earnings per share to be in the range of $1.46-$1.56. HPE stock has fallen over 22.3% in the last three months (source: Google Finance). According to tipranks.com, HPE stock has a limited average price target of $20.33.