Hewlett Packard Enterprise Cuts Forecast on Costs, Cloud (1)

(Bloomberg) -- Hewlett Packard Enterprise Co. reported quarterly revenue that fell far short of estimates and trimmed its profit forecasts, hampered by rising component costs and competition from cloud-based rivals.

Profit, excluding some items, will be 41 cents to 45 cents a share in the current quarter, the Palo Alto, California-based company said Thursday in a statement. Analysts projected 47 cents, according to data compiled by Bloomberg. The company also reduced its annual forecast to $1.88 to $1.98 a share. Analysts estimated $2.03.

Chief Executive Officer Meg Whitman -- who has been slimming down the company -- is battling rising competition from cloud-based technology providers that let customers access computing power without having to buy their own servers and storage gear. While she’s been on the hunt for acquisitions to help with growth, she’s facing an uphill climb against companies such as Amazon.com Inc., which saw cloud revenue jump 47 percent in its last quarter while Microsoft Corp.’s similar product almost doubled.

Hewlett Packard Enterprise cited currency fluctuations, higher commodities pricing and “near-term execution issues” in reducing its forecast. The shares fell as much as 6.7 percent in extended trading after closing at $24.66 in New York.

Revenue declined 10 percent to $11.4 billion in the first quarter ended Jan. 31, the company said. Analysts’ projected $12.07 billion. It marked the third straight quarter that Hewlett Packard Enterprise has fallen short of estimates.

Sales in the key Enterprise Group -- which includes servers and storage gear -- dropped 12 percent to $6.3 billion. The business reported declines of 9 percent in the previous quarter and 8 percent in the period before that.

In that unit, server sales fell 12 percent from a year earlier while storage revenue declined 13 percent. Networking sales dropped 33 percent.

The company reported quarterly profit, before certain items, of 45 cents a share compared with analysts’ average estimate of 44 cents, according to data compiled by Bloomberg.

This year, Hewlett Packard Enterprise should wrap up two multibillion deals unveiled in 2016. In September, the company said it was spinning off and merging some software assets in a deal with U.K.-based Micro Focus International Plc. Last May, the company said it would combine its technology-services division with Computer Sciences Corp.

At the same time, HPE has been buying other companies, including Niara Inc., which uses machine learning and data analytics to find security threats. Terms of the Niara deal were undisclosed. The company also announced plans last month to acquire Cloud Cruiser, which helps companies manage technology assets. It recently spent about $650 million on technology gear maker Simplivity.

(Updates with revenue in the fifth paragraph.)

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack

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