By Jon Swartz
Stock falls 5% in after-hours trading, Neri introduces three-year plan to cut $1 billion in costs
Hewlett Packard Enterprise Co. shares slipped about 5% in after-hours trading Thursday after the computing giant reported fiscal second-quarter results that fell short of Wall Street estimates.
HPE (HPE) reported a loss of $821 million, or 64 cents a share, on revenue of $6.01 billion, down 16% from $7.15 billion a year ago. After adjustments for an $865 million impairment charge and other effects, the company reported earnings of 22 cents a share, down from adjusted earnings of 42 cents a share a year ago.
The company, which pointed to supply chain constraints as part of the problem, offered no financial guidance for the current quarter or fiscal year.
Analysts surveyed by FactSet had expected adjusted earnings of 30 cents a share on sales of $6.33 billion.
"The global economic lockdowns since February significantly impacted our fiscal Q2 financial performance," HPE Chief Executive Antonio Neri said in a statement announcing the results. "We exited Q2 with $1.5 billion in orders across the portfolio, representing two times the average historical backlog."
"We are taking decisive steps to navigate the near-term uncertainty, while 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," Neri said.
Chief Financial Officer Tarek Robbiati deemed the economic climate "very difficult" and told MarketWatch the company is exploring cost reductions that could include layoffs, furloughs, and hiring restrictions to "right-size" operations.
Among the other measures HPE is taking are 25% salary cuts for Neri and executive vice presidents through 2020, as well as "changes to its workforce" meant to shave $1 billion in future costs.
A.B. Bernstein analyst Toni Sacconaghi, echoing the concerns of other analysts on the conference call, expressed wariness over what he called another "significant multi-year effort" by HPE to slash costs. Neri characterized this quarter as a supply issue because of coronavirus vs. a dip in IT demand last year.
The outbreak of COVID-19 went far beyond an economic thrashing: Neri estimated that half of HPE's employees will permanently work from home, and those who do return to the office will find radically restructured facilities.
HPE shares are down 34.7% this year while the S&P 500 index is down 8.7%.
-Jon Swartz; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
May 21, 2020 17:55 ET (21:55 GMT)
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