Hewlett Packard Enterprise (HPE) reported fourth-quarter earnings today, ending its first year as a standalone company and opening a new chapter where large chunks of the company won’t be around much longer.
In fiscal 2016, which ended Oct. 31, HPE’s revenues shrank by 4 percent to $50.1 billion. And the company is set to shrink in a more literal way, as its Software and Enterprise Services businesses are being spun off and merged with Micro Focus and CSC, respectively.
Even after the divestitures, HPE will have some shoring up to do. The Enterprise Group, which represents 51 percent of HPE‘s sales and will make up the bulk of the future HPE, saw revenues fall 9 percent year-over-year in the fourth quarter, to $6.7 billion. (The drop was only 3 percent if you account for the strong dollar, HPE says.)
Servers represented 52 percent of the Enterprise Group’s revenues in the quarter, HPE reported. Networking was only 9 percent of the group’s sales — and was also the hardest-hit segment of the group, with sales falling 34 percent compared with the same quarter a year ago.
Sales for most IT vendors, not just HPE, could be in jeopardy as enterprises turn to public clouds for infrastructure. Some analysts are speculating that HPE could counter by making acquisitions.
That might make it sound like HPE is on some kind of yo-yo diet when it comes to mergers. But the company has some not-unhealthy options in areas such as storage, as Bloomberg noted today.
A related possibility would be for HPE to buy a player in hyperconverged infrastructure to go up against Nutanix. One recent rumor said HPE is considering an acquisition of SimpliVity, Nutanix’s chief rival.
Running the numbers
For its fourth quarter, which ended Oct. 31, HPE reported revenues of $12.5 billion, down 7 percent from $13.4 billion in last year’s fourth quarter.
Net income was $302 million, or 18 cents per share, compared with $1.4 billion, or 75 cents per share, a year ago.
Non-GAAP net income of 61 cents matched analysts’ expectations, according to Thomson Financial.
HPE shares were down 2 percent at $22.46 in after-hours trading.