HPE's stock drops 4% after reporting Q4 results as revenue declines

Due to tariffs and longer sales cycles in North America, HPE fiscal fourth-quarter revenue is lower than analysts' projections. (Pixabay)

Hewlett Packard Enterprise's stock fell by about 4% in after market trading on Monday after reporting its Q4 earnings. Prior to Monday night's dip, Hewlett Packard Enterprise (HPE) shares have been on a roll this year by climbing 32%. HPE's shares had bounced back up by almost 2% in early morning trading on Tuesday.

HPE reported fourth quarter net income of $480 million, or 36 cents per share, on revenue of $7.22 billion, which was down 9% from the same quarter a year ago. Minus charges, HPE had earnings of 49 cents per share. Wall Street analysts had projected revenue of $7.40 billion and fourth-quarter non-GAAP earnings of 46 cents a share.

For the fiscal year, HPE reported revenue of $29.1 billion with earnings per share of $1.77. Analysts expected revenue of $29.3 billion and $1.74 per share.

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On Monday's earnings call, HPE CEO Antonio Neri, who has held that position for almost two years now, cited longer sales cycles, tariff disputes and "the deflationary side of the commodities" as the primary factors for the company's results.

"We believe the demand is there," Neri said, according to a Seeking Alpha transcript. "It's just a matter of timing in many ways, and obviously customers are looking at where to spend the dollars. And I would say a lot of dollars are spent to make sure they can harness the power of the data as fast as possible because that's the value of doing this."

HPE reported an 11% drop in its Hybrid IT segment, which is its largest. Revenue for Hybrid IT, which includes servers, storage and networking equipment for data centers, was $5.67 billion in the fourth quarter, down from analysts' estimates of $5.74 billion.

Within Hybrid IT, compute revenue, which includes sales of servers, was down 13%. Compute revenue accounted for 45% of HPE's total revenue.

In the same segment, HPE reported that revenue from its Apollo storage service was up 21% year-over-year when adjusted for currency while HPE's hyperconverged infrastructure services increased 14% over the same time frame. HPE's Composable Cloud revenue was up 21% year-over-year.

RELATED: HPE splashes $4B on 'intelligent' edge products and services

HPE's intelligent edge revenue chipped in $723 million in the fourth quarter. HPE Aruba product revenue was down 7% year-over-year when adjusted for currency while HPE Aruba Services revenue was up 17%.

For the year, intelligent edge delivered revenue of $2.8 billion, down 2% year-over-year "due to some execution issues in North America early this year," according to Neri. As service providers and enterprises move their applications and services to the edge of networks, HPE is counting on being a player.

"HPE is the edge-to-cloud platform-as-a-service company, and we will execute our strategic pivot to offering our entire portfolio as a service by 2022 as we drive sustainable, profitable growth," Neri said. "HPE is uniquely positioned to meet these needs and provide a consistent cloud-like experience for apps and data everywhere. Our edge-to-cloud platform delivered as a service gives customers the ultimate in choice and flexibility and control to all their apps and data no matter where they live, so we can deliver outcomes for their businesses."

Going forward in the first quarter, HPE is projecting 42 cents to 46 cents earnings per share while analysts expect earnings of 42 cents a share with revenue of $7.35 billion.

For fiscal 2020, HPE's guidance is $1.78 to $1.94 earnings per share compared to an average of $1.85 by analysts.

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