HPE Counting On Acquisitions For Its Next Round Of Growth

Earlier this week, Hewlett Packard Enterprise Co. (NYSE: HPE) reported its second quarter results. While it beat all market expectations, its cautious outlook sent the stock tumbling.

HP Enterprise’s Financials

HPE’s revenues grew 10% over the year to $7.5 billion, ahead of the Street’s forecast of $7.4 billion. Adjusted EPS of $0.34 was also ahead of the market’s forecast of $0.31 for the quarter.

By segment, revenues from its hybrid IT business grew 7% to $6 billion. Revenues from the Intelligent Edge revenues climbed 17% to $710 million, and Financial Services revenues grew 5% to $916 million.

During the quarter, HPE returned $1 billion to shareholders through share repurchases and dividends. This was part of the $7 billion stock buyback program announced by the company earlier in the year to manage the tax code change.

HPE expects current quarter earnings to come in at $0.35-$0.39 per share, and full-year earnings of $1.40-$1.50 per share. The market was looking for earnings of $0.36 per share for the quarter and $1.41 per share for the year.

This was the first full quarter under HPE’s new CEO Antonio Neri. Former CEO Meg Whitman had stepped down earlier this year. Despite beating all market expectations, Antonio believes that the second half of the year will be “challenging” due to tougher compares from the previous year. Following the results, HPE’s stock fell 10.5% in the day.

HP Enterprise’s Acquisitions

HPE plans to address some of these growth concerns through acquisitions. Earlier last quarter, it announced the acquisition of networking firm Cape Networks. Cape Networks applies a sensor-based and network agnostic approach to service assurance. It proactively tests the availability and performance of services and applications and alerts IT professionals of issues before they impact the user or the business. By offering easy-to-use dashboards, its product helps simplify IT management for organizations. HP plans to integrate Cape Networks’ offerings with Aruba NetInsight to deliver comprehensive AI-powered analytics and assurance so that customers can quickly adapt to changes in the user, device, application, and network environments. The merger will also help HPE compete against other networking giants like Cisco and Dell. Terms of the acquisition were not disclosed. Cape Networks was founded in 2013 by David Wilson, Fouad Zreik, Michael Champanis, and Ross Douglas. It is based both out of San Francisco and Cape Town, South Africa.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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