HPE Cuts Full-Year Forecast on Networking Slowdown, Chip Crunch
(Bloomberg) -- Hewlett Packard Enterprise Co. reduced its outlook for sales growth and profit in the current fiscal year, citing lower demand for networking products and a crunch in computer chip availability.
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Revenue will increase as much as 2%, excluding currency fluctuations, in the fiscal year ending in October. Previously, HPE saw 2% to 4% annual sales growth. Profit, excluding some items, will be $1.82 to $1.92 a share, from an earlier earnings forecast of $1.82 to $2.02 a share.
The downward revision is due primarily to a slowdown in the networking market and a lack of availability of graphics processor units required to deliver high-powered servers, Chief Executive Officer Antonio Neri said in an interview. Supplies of those chips, known as GPUs, should improve in the second half of the year. And the networking market is poised to recover in fiscal 2025, he said.
The shares declined about 5% in extended trading after closing at $15.23 in New York. The stock declined 2% over the past 12 months as investors grew concerned about waning appetite for corporate IT investment. But peers including Dell Technologies Inc. and Super Micro Computer Inc. have seen huge rallies in that period due to interest in servers to power new artificial intelligence technology.
In January, HPE announced the acquisition of Juniper Networks Inc. for $14 billion, a move to focus the company on networking. Neri said new weakness in that market doesn’t concern him because downturns often fuel consolidation, which will ultimately put HPE combined with Juniper in a stronger place. It’s “perfect timing,” he said, adding the networking demand recovery should begin around the time the deal is expected to close toward the end of 2024.
In the period ended Jan. 31, sales slipped 14% to $6.76 billion. Analysts, on average, estimated $7.1 billion, according to data compiled by Bloomberg. Server revenue dropped 23% to $3.4 billion. Intelligent Edge, which contains HPE’s networking business, gained 3% to $1.2 billion. Profit, excluding some items, was 48 cents a share, compared with analysts’ average estimate of 45 cents.
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