Despite CEO Meg Whitman’s best efforts, Hewlett-Packard Co. spinoff Hewlett Packard Enterprise Co. is struggling to compete in the enterprise technology sphere, the company admitted during its first-quarter earnings call on Thursday.
During the fiscal quarter ending on Jan. 31, HPE’s revenue declined by 10.4 per cent to $11.4 billion USD, missing analysts’ projections by $670 million USD.
“Overall, as I look back on [the first quarter], I’d say our performance was mixed,” Whitman said, noting that the company “encountered some unexpected headwinds during the quarter.”
“We saw several external factors impacting our performance that will become more challenging through the remainder of fiscal 2017, and we came up against some execution related problems that we are now fixing,” she said.
Whitman said that to some extent HPE’s reduced earnings could be attributed to foreign exchange rates, particularly U.S. dollar’s rise against the euro and yen. However, she also cited a “challenging industry-wide commodities market,” particularly tight negative-AND supplies that she said affected sales in the company’s storage and computing businesses and raised dynamic random-access memory (DRAM) prices, which she said “will accelerate and create near-term challenges to our profitability.”
More importantly, however, Whitman acknowledged that HPE’s revenue was impacted by a tough enterprise technology market, particularly in core servers and storage.
“We saw a significantly lower demand from one customer and major tier one service provider facing a very competitive environment,” she said.
To address these challenges, Whitman said that HPE’s leadership would continue its present efforts to reshape the company into a more aggressive competitor in the enterprise software sphere by focusing on three key pillars: hybrid IT, what she called “intelligent edge,” and services. For example, the company recently appointed a new global head of sales and new sales leads in each of its geographic regions, including Canada. The company also hired a new leader for its Technology Services business and channel program.
“While these changes were the right changes to make, it was a lot for the organization to take in,” she said. “Frankly, as we headed into [quarter one], we overloaded many of our top people and disrupted the day-to-day cadence of our business more than we should have. The good news is that we’ve indentified the problem and are fixing it. More importantly, once the dust settles, the changes we’ve made will leave HPE in a much better position to compete and win.”
In the end, Whitman said that while HPE could have done without the market headwinds that affected its journey of the past three months, she remains confident in the company’s strategy and secure in her belief that HPE is on the right track.
Our thanks to investment research platform Seeking Alpha for the transcriptions from HPE’s Feb. 23 Q1 earnings call.