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Friday 22 May 2020

Pandemic takes toll on HPE Q2

HPEQ2 results out overnight from HPE show the impact of the COVID-19 crisis is starting to bite. Q2 revenues of $6bn were down 15% year-on-year (constant currency) and non-GAAP operating profit was down 42% to $365m.

As a result, the company is taking steps to cut costs, including salary reductions for leaders (e.g. at CEO and Executive VP level base salaries will be reduced by 25%). The firm is also looking to save $1bn through restricting recruitment, changing its property model, and making business process improvements. The companhy has also taken steps to support its channel.

HPE has set a course to become a totally as-a-service business by 2022. If that wasn’t challenge enough, trying to achieve this under tighter cost controls will make the goal even harder to hit. However, CEO, Antonio Neri said the firm was still “ensuring we align resources to priority growth areas so that we are well positioned to accelerate our edge-to-cloud strategy and address the needs of our customers in a post-COVID-19 world”.

Positive spots include 17% annual run rate growth for the firm’s GreenLake as-a-service offering, and traction in North America with its Intelligent Edge business growing 12%.

Advisory & Professional Services revenue was down 8% to $237m – although it hit an operating margin of 0.8% compared to (5.4%) in FY19. Depending on the account/sector - in other words whether project spend is being cut or whether the customer is looking to accelerate competitiveness/the digital journey - this business line will be facing both opportunities and intensified pressure. HPE can help itself by ensuring customers fully understand how its services proposition addresses both existing and new challenges in the context of the pandemic.

Posted by: Kate Hanaghan

Tags: results   cloud   as-a-service   edge  

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