Dive Brief:
- Hewlett Packard Enterprise’s earnings dropped 13% compared to the same quarter last year, according to company earnings reports released Thursday, Silicon Angle reports. HPE revenues have declined steadily for the last three quarters.
- HPE executives blamed a massive restructuring the company kicked off in November 2015 when it separated from HP Inc., for the decline, as well as "one-time events' and a sudden drop in sales to a single "tier 1 service provider," according to the report. CEO Meg Whitman did not identify the customer, but many believe it’s Microsoft. Bernstein Research analyst Toni Sacconaghi projected Microsoft bought somewhere between $2 billion and $2.5 billion worth of HPE servers last year, according to Fortune.
- Whitman and others maintain that HPE is on the brink of a turnaround. “We think Q2 is going to be a low point," Chief Financial Officer Tim Stonesifer said on the earnings call, according to Silicon Angle. "We expect a return to growth in the latter part of the year."
Dive Insight:
It’s been 18 months since HPE and HP Inc. split up, and the impending arrival of HPE as a smaller, more agile powerhouse has yet to materialize.
Whitman did say that the company’s server business, which has high volume but slim margins, may not be viable in the future because HPE depends heavily on one customer (believed to be Microsoft) in that area, according to Fortune. Sales to that customer are expected to continue to decline given that businesses HPE sells to are increasingly designing their own data center hardware.
Whitman said HPE may instead focus on more profitable products like high-end servers and storage. It’s yet another example of how companies are using the cloud more while the traditional servers of yesteryear are falling by the wayside.
Getting rid of the server business would certainly fit with Whitman’s slash and burn approach to streamlining the company, which has earned her a lot of criticism. Nevertheless, Whitman maintains the approach is the best course of action for the company.
