INDUSTRY

Hewlett Packard Enterprise has announced financial results for its fiscal 2017 second quarter, ended April 30, 2017, which have been recast to reflect the spin-merger of its Enterprise Services business as discontinued operations.

Second quarter net revenue from continuing operations of $7.4 billion was down 13% from the prior-year period and down 5% when adjusted for divestitures and currency.

Second quarter GAAP diluted net loss per share from continuing operations was ($0.29), down from a GAAP diluted net earnings per share (EPS) from continuing operations of $0.18 in the prior-year period. Second quarter non-GAAP diluted net EPS from continuing operations was $0.25, down from $0.33 in the prior-year period. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS from continuing operations exclude after-tax costs of $903 million and $0.54 per diluted share, respectively, related to valuation allowances and divestiture taxes, separation costs, restructuring charges, acquisition and other related charges, tax indemnification adjustments, defined benefit plan settlement charges and remeasurement benefit, and an adjustment to earnings from equity interests.

“Despite some current headwinds, we delivered Q2 non-GAAP EPS in line with our outlook,” said Meg Whitman, President and CEO, Hewlett Packard Enterprise. “We saw strength in major components of our growth strategy, including high-performance compute, Aruba, all-flash storage and Technology Services. While we still have much more work to do, HPE’s Q2 results give me confidence that our efforts are delivering for customers and partners.”

Outlook

For the fiscal 2017 third quarter, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of ($0.02) to $0.02 and non-GAAP diluted net EPS to be in the range of $0.24 to $0.28. Fiscal 2017 third quarter non-GAAP diluted net EPS from continuing operations estimates exclude after-tax costs of approximately $0.26 per diluted share, related primarily to separation costs, restructuring charges and the amortization of intangible assets.

For fiscal 2017, Hewlett Packard Enterprise estimates GAAP diluted net EPS to be in the range of ($0.03) to $0.07 and non-GAAP diluted net EPS to be in the range of $1.46 to $1.56. Fiscal 2017 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.49 per diluted share, related primarily to valuation allowances and divestiture taxes, separation costs, restructuring charges, , amortization of intangible assets, tax indemnification adjustments, defined benefit plan settlement charges and remeasurement benefit, and an adjustment to earnings from equity interests.

“While we faced margin pressure in Q2, we expect improvement through the remainder of the year as we mitigate commodities cost pressure and eliminate costs associated with spin-mergers and acquisitions,” said Tim Stonesifer, CFO, Hewlett Packard Enterprise.  “The completion of the spin-merger of our Enterprise Services business gives us the opportunity to further optimize the cost structure of the future HPE. We are now focused on driving an incremental $200-300 million in cost savings in just the second half of this year. We maintain our FY17 EPS outlook.”

Fiscal 2017 second quarter segment results

• Enterprise Group revenue was $6.2 billion, down 13% year over year, down 7% when adjusted for divestitures and currency, with an 8.8% operating margin. Servers revenue was down 14%, down 14% when adjusted for divestitures and currency, Storage revenue was down 13%, down 13% when adjusted for divestitures and currency, Networking revenue was down 30%, up 14% when adjusted for divestitures and currency, and Technology Services revenue was down 2%, up 3% when adjusted for divestitures and

• Software revenue was $685 million, down 11% year over year, down 9% when adjusted for divestitures and currency, with a 26.4% operating margin. License revenue was down 29%, down 28% when adjusted for divestitures and currency, Support revenue was down 4%, flat when adjusted for divestitures and currency, Professional Services revenue was down 17%, down 16% when adjusted for divestitures and currency, and Software-as-a- service (SaaS) revenue was up 3%, up 4% when adjusted for divestitures and currency.

• Financial Services revenue was $872 million, up 11% year over year, net portfolio assets were down 1%, and financing volume was down 7%. The business delivered an operating margin of 8.9%.