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Hardware sizzles for HPE – and brings home the bacon

Whitman hails 'best quarter' since she grabbed CEO chair

Software and IT services might make the world go round – at least in the heads of Wall Street moneymen – but it was hardware that once again brought home the bacon for Hewlett Packard Enterprise.

For the three months ended 30 April (second quarter fiscal year 2016 – summary, tables [PDFs]), HPE's turnover edged up one per cent as reported to $12.7bn, or grew five per cent in constant currency. Analysts had expected sales of $12.35bn.

"I have to say that we have delivered the best performance since I joined," said CEO Meg Whitman, on a call with financial analysts. She grabbed the company's controls in September 2011.

The Enterprise Group was where all of the action was in the quarter, growing seven per cent as reported to $7bn. The unit made a pre-tax profit of $1.76bn versus $1.98bn; this was blamed on the forex, a heavier mix of large company deals and R&D investments, HPE said.

Server sales climbed seven per cent; storage was up two per cent; networking (boosted by a circa $200m contribution from Aruba) was up 57 per cent; and Technology Services declined six per cent.

Revenue at Enterprise Services (ES), the problem child at HPE, was down two per cent year-on-year to $4.7bn. The rate of top line declines has slowed but the division won't be HPE's problem – it is being merged with CSC.

Within ES, Infrastructure Technology Outsourcing fell one per cent; and Application Business Services was down three per cent or was flat in constant currency.

ES is where many of the redundancies in the last four years have fallen, and where post-cutting programs and multiple restructures were applied to convert losses into profits. In HPE's Q2, pre-tax profit in the unit was $317m compared to $172m.

HPE said it continued to see "the benefits of our restructuring cost actions and improving sales motion."

The Software unit – the industry best-kept secret, a hackneyed phrase the firm whips out from time to time – declined 13 per cent to $774m but was up two per cent when adjusted for acquisitions and divestitures, the firm said.

Licence was down 12 per cent; support dropped 16 per cent; professional services was down three per cent; and SaaS down eleven per cent. Pre-tax profit from software grew to $192m from $159m.

And last and perhaps least, sales in Financial Services rose to $788m from $776m.

Total costs and expenses at group level was $12.22bn, up from $12.12bn, leaving operating profit at $492m, up from $428m. Net profit was $320m versus $305m. ®

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