Hewlett Packard Enterprise delivered a stronger-than-expected first quarter and in line outlook. HPE CEO Meg Whitman said the results showed the company was "more focused and nimble."
The company reported first quarter earnings of $300 million, or 15 cents a share, on revenue of $12.7 billion, down 3 percent from a year ago. Excluding charges, HPE delivered earnings of 41 cents a share.
Wall Street was looking for first quarter non-GAAP earnings of 40 cents a share on revenue of $12.68 billion.
As for the outlook, HPE said the second quarter non-GAAP earnings range will be 39 cents a share to 43 cents a share. For the second quarter, Wall Street was expecting non-GAAP earnings of 42 cents a share on revenue of $12.3 billion.
For 2016, HP said that non-GAAP earnings will be between $1.85 a share and $1.95 a share.
On a conference call, Whitman said:
Our portfolio is truly the best we've had in years and is driving strong customer traction. HPE is the leading infrastructure provider for SAP HANA with nearly twice the number of shipments over the next competitor and this quarter we won a number of important deals including one with Canadian communications company Rogers to help them transform their existing traditional IT to a hybrid infrastructure.
Whitman also called out HP's networking traction, which was helped by the Aruba acquisition as well as China demand.
Networking revenue grew 62% year-over-year in constant currency. Normalized for the Aruba acquisition revenue grew double digits driven by record China revenue as well as good performance in other regions. As we've discussed before, we are seeing strength in China as customers anticipate the completion of the deal with Shingwa that we announced last year. We are currently working through the final regulatory approval in China and we expect the deal to close by the end of May. Aruba also grew double digits at an operational level and we saw strong pull through of HPE's switching portfolio to complement Aruba's wireless offerings.
While HPE's quarter was devoid of growth, analysts cheered the company's shareholder return plan. CFO Tim Stonesifer said the company will return at least 100 percent of its free cash flow to shareholders.
By the unit, HPE's performance was mixed. To wit:
- Enterprise group revenue was $7.1 billion, up 1 percent from a year ago. Networking revenue was up 54 percent in the first quarter, but servers and storage sales were down 1 percent and 3 percent, respectively.
- Enterprise services revenue fell 6 percent from a year ago to $4.7 billion.
- Software revenue fell 10 percent from a year ago to $780 million.