HPE misses Q4 revenue targets, sees decline in hybrid IT group

HPE said quarterly revenue for its hybrid IT group was down 11% to $5.7 billion.

HPE on Monday delivered mixed fourth quarter and fiscal 2019 results as the company continues to see declining revenue in several business lines. The enterprise software player reported fourth quarter net income of $480 million, or 36 cents a share, on revenue of $7.22 billion, down 9% from a year ago. Excluding charges, HPE delivered earnings of 49 cents a share.

Wall Street was looking for fourth quarter non-GAAP earnings of 46 cents a share with $7.4 billion in revenue. For the fiscal year, HPE reported revenue of $29.1 billion with EPS of $1.77. Analysts were looking for $29.3 billion with EPS of $1.74. 

Elsewhere on the balance sheet, HPE said quarterly revenue for its hybrid IT group was down 11% to $5.7 billion. Broken down, the company said revenue from its Apollo storage service was up 10% year over year and Composable Cloud revenue was up 21% year over year when adjusted for currency. HPE's hyperconverged infrastructure services were up 14% year over year when adjusted for currency.

Meanwhile, the company's intelligent edge revenue came to to $723 million, and financial services revenue was $878 million, down from $939 million a year ago. HPE said Nimble Storage revenue was up 2%, while Pointnext services orders and Nimble services orders were flat. HPE also said Aruba product revenue was down 7% while Aruba services revenue was up 17%.

Analyst Patrick Moorhead noted that HPE's growth in strategic areas like Aruba Services and Apollo is indicative of a positive long term revenue strategy.

"For HPE, I believe the future is all about its differentiation and execution in the hybrid cloud and 'everything as a service' about which I am optimistic," said Moorhead. "The industry is out of the 'drunken sailor mode' where 'everything was going to the public cloud or perish' and enterprises are more pragmatic in that many will keep a lot of data in an on-premise cloud model. This makes HPE's newly-introduced Kubernetes container platform vital to its success."

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HPE said it had Q4 annualized revenue run rate of $462 million.

"I am confident in our ability to drive sustainable, profitable growth as we continue to shift our portfolio to higher-value, software-defined solutions and execute our pivot to offering everything as a service by 2022," said HPE chief executive Antonio Neri. "Our strategy to deliver an edge-to-cloud platform-as-a-service is unmatched in the industry."

In terms of outlook, analysts are expecting HPE to deliver first quarter earnings of 42 cents a share with revenue of $7.35 billion. HPE responded with first quarter non-GAAP earnings between 42 cents and 46 cents a share. For the fiscal year the company expects non-GAAP EPS to be in the range of $1.78 to $1.94 -- in line with analyst estimates for $1.85 a share.

Shares of HPE were down almost 4% after hours.