All the key info as HPE revenue slides
CEO Antonio Neri says vendor performed well in an 'uneven market'
Hewlett Packard Enterprise (HPE) saw its revenue slide by seven per cent in its Q3, but CEO Antonio Neri stressed that the vendor performed well in an "uneven market" feeling the effects of macroeconomic uncertainty.
But the vendor's share price rose more than seven per cent in after-hours trading after its profit forecast topped analyst predictions.
We've picked out the key information from the earnings release and accompanying earnings call.
Uncertain climate has had an impact
HPE followed firms including Cisco in claiming that political unrest had dampened its quarterly performance.
During the three-month period ending 31 July 2019 sales declined seven per cent year on year to $7.2bn (£5.9bn), while net earnings of $451m swung to a loss of $27m.
But chief exec Neri (pictured) said that HPE "continued to demonstrate disciplined execution, which expanded profitability across the company" - pointing to an improved non-GAAP operating profit margin of 9.9 per cent and increased non-GAAP earnings per share of $0.45 - up seven per cent year on year.
"These results reflect our momentum as we take deliberate steps to shift our portfolio to higher-value, software-defined offerings delivered as a service," he said.
Neri also highlighted the US-China trade war as a barrier for the vendor.
"We continue to see uneven demand due in part to ongoing trade tensions, which impact market stability and customer confidence," he claimed. "This is showing up in elongated sales cycles, particularly in larger deals as we noted last quarter and reiterated during our IR Summit at our Discover conference in June."
GreenLake is a $2.5bn business
HPE's GreenLake as-a-service offering was at the forefront of the vendor's Las Vegas partner conference earlier this year when it realised packages designed specifically for the channel and mid-market.
On the earnings call, Neri said the business' contract value is now in excess of $2.5bn, with over 600 customers.
"As we go along, we're going to share more about this," he said. "But the bottom line there is with new logos and expansion of current contracts, so that's the reality.
"One of the things that we saw with GreenLake, which is very pleasing, is the ability to continue to grow once you're in the contract.
"The renewal rates are 99 per cent and the NPS score is 91, which is remarkable for a business like that."
HPE said that GreenLake saw growth of 10 per cent year on year in the quarter, or 42 per cent if one large deal in the corresponding quarter last year is removed from the equation.
Key areas grew
Despite the revenue decline, HPE said that all the businesses it considers central to its future saw growth, including high-performance compute, hyperconverged, hybrid cloud and Pointnext.
"Importantly, we continue to deliver growth in key areas of strategic investment," he said.
"Our gross margin of 33.9 per cent is up 170 basis points from last quarter and 340 basis points year over year. This was fuelled by the mix shift to higher-value offerings and commodities pricing tailwinds."
HPE's "mix shift" was mentioned numerous times on the earnings call, with the vendor claiming to be focusing more on higher-value deals with more services attached.
Its "HPE Next" initiative - a restructuring of the business which has included redundancies and "portfolio rationalisations" - also contributed.
Neri said that if the low-margin tier 1 service business, which HPE is exiting, is taken out the equation, revenue only declined by three per cent.
HPE says it can withstand commodity pricing declines
An analyst on the earnings call raised the fact that a number of other tech vendors have pointed out that lower community costs are resulting in lower average selling prices (ASPs) to customers.
Neri said that while prices may be dropping, HPE can withstand this by having more products attached to the solutions it is selling.
"Definitely, the commodity prices has started to come down, but I think we have executed with discipline on pricing and costs," he said. "And therefore, we're able to hold a lot of that.
"The content that gets attached to each of the solutions continues to grow. So whether it is memory, sizing or storage, sizing continues to grow. While the cost per bit may be coming down, the reality [is that] more [of] our overall content gets attached, and therefore [has] less impact."
"But I think we have done an excellent job in retaining the cost decline through more content attach and better pricing discipline."