Top four takeaways from HPE's latest results
HPE's share price jumped off the bat of better-than-expected results. We've waded through the numbers and the earnings call
Hewlett Packard Enterprise (HPE) released its Q3 results yesterday, with revenue up three per cent year on year to $8.2bn (£6.3bn).
The results for the three months ending 31 July beat analyst expectations, driving HPE's share price up as much as six per cent in after-hours trading.
We've picked out the top four takeaways from HPE's quarter:
HPE is better off without its software division
The results didn't just drive up HPE's share price, but also those of Micro Focus, which last week completed the acquisition of HPE's software business.
The Newbury-based firm saw its share price rise 8.24 per cent, as HPE's former software arm reported better-than-expected revenue of $718m for the quarter, but still down three per cent year on year.
Over the last few quarters HPE has been portraying its results in two lights, the first being actual results and the second the results of what is dubbed "Future HPE" - which essentially removes the lower-performing aspects of the business from the equation (more on this later).
While HPE itself - which included a full quarter with the software division, before the sale completed - saw revenue up three per cent, Future HPE saw a lower revenue of $7.5m, but a year-on-year increase of six per cent.
The ridding of its troubled legacy software will allow HPE to focus on Nimble Storage and SimpliVity, both of which it acquired this year, while the early signs for Britain's newly crowned largest software company Micro Focus are positive. So far, so good.
Mystery tier-one service provider continues to cast a shadow
Also removed from the equation in Future HPE is the tier-one server business, which has been plagued over recent quarters by an unknown tier-one service provider "dramatically" decreasing its business with the vendor.
HPE's figures are more impressive if you remove this business, with revenue up 10 per cent year on year.
The mystery partner was first referred to by CEO Meg Whitman in February, when HPE released its Q1 results.
Whitman was coy about providing details, but opened up more during the Q2 earnings call by saying that HPE entered into the tier-one service provider market around 18 months ago, with the business driven by one particular customer.
While not named, it has been speculated that the customer is one of the big three public cloud providers.
On the most recent earnings call, transcribed by Seeking Alpha, Whitman said HPE hopes to find a solution for the "very lumpy" part of the business soon.
Looking specifically at HPE's Enterprise Group (the bulk of the business now the software business has been sold), revenue was up three per cent year on year to $6.79bn, but up nine per cent if tier one is excluded.
HPE's server revenue was flat but, again, saw 12 per cent growth if tier one is discounted.
Top four takeaways from HPE's latest results
HPE's share price jumped off the bat of better-than-expected results. We've waded through the numbers and the earnings call
HPE's restructuring will have implications for employees
Along with HPE Future is another initiative dubbed HPE Next - which Whitman explained is a programme to "produce an organisation that is precisely built to compete and win in the marketplace" - via restructuring and cost savings.
The need to save costs had already been explained in HPE's Q2 results, when CFO Tim Stonesifer said the vendor would look to save between $200m and $300m in the second half of this year, with half the savings coming from "labour-related" areas.
Expanding on this during the latest earnings call, Whitman said HPE Next involves the "reducing of layers" in the customer-facing side of HPE.
HPE also completed the sale of its Roseville, California campus for $100m during the quarter, and then "leasing back smaller offices there", according to Whitman. The vendor had reportedly already cut 115 jobs there at the end of last year.
Overall, HPE is looking to save $1.5bn over the next three years.
This year's acquisitions are already making their mark
HPE received high praise for its acquisitions of SimpliVity and Nimble Storage at the start of the year, with the double deal seen as a legacy vendor taking steps into emerging technologies.
Whitman singled out both vendors during the earnings call, attributing HPE's 30 per cent growth in all-flash storage to Nimble, with the figure "exceeding both profit and revenue plans for the quarter".
"We are already seeing the benefits of the combination of Nimble and HPE and we couldn't be more excited about the potential," she added.
SimpliVity meanwhile was credited with contributing to a surge in the hyperconverged market, with HPE seeing growth of over 200 per cent from an admittedly small case, Whitman said.