Hewlett Packard Enterprise (HPE) reported a 14 percent decline in its server revenues, year over year, during its second quarter 2017 earnings report yesterday.
Its total second quarter revenue was $9.9 billion. But after accounting for the divestiture of its Enterprise Services business, its net revenue for the quarter was $7.4 billion, down 5 percent year over year.
The company’s stock price dropped about 6 percent this morning to $17.68 per share.
HPE said its revenue declines were driven mainly by reduced server demand from a single Tier 1 customer and lower license and professional services sales in software. The company declined to name the Tier 1 customer, but it’s rumored to be Microsoft. The computer giant is heavily involved with the Open Compute Project (OCP), which is working on white box servers.
HPE’s CFO Tim Stonesifer said the company plans to de-emphasize the server category “to focus on more profitable areas.”
He also said HPE was focused on cost savings, projecting to save $200 million to $300 million in the second half of this year. “These savings will be a combination of tight control over spending and simplifying the organization through delayering and spend control actions as we become a smaller, more nimble company.”
HPE will become smaller later this summer when it completes the spin-out of much of its software business to Micro Focus.
HPE’s storage revenues also declined during the quarter, dropping 13 percent year over year. “We do expect to maintain share in the high-growth all-flash portion of the market,” said Stonesifer. HPE announced in March that it is buying the flash-storage company Nimble Storage.
For its fiscal third quarter 2017 guidance, the company estimates earnings per share to be in the range of $.24 to $.28. And for the full year, it estimates earnings per share in the range of $1.46 to $1.56.