How Hewlett Packard Enterprise Views Demand Environment
Slow demand for major business segments
Hewlett Packard Enterprise’s (HPE) revenue in fiscal 2017 has been impacted by a slow demand environment for major business segments. Pricing costs in the United States (SPY) have negatively impacted demand in the quarters prior to fiscal 3Q17. HPE’s revenue rose 3.0% YoY (year-over-year) in fiscal 3Q17, which ended in July 2017. Demand in fiscal 3Q17 from Europe was stable, primarily driven by Germany. HPE experienced double-digit growth in Japan and emerging markets such as India and China.
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Tier 1 demand was flat
HPE stated that excluding Tier 1 revenue in fiscal 3Q17, revenue rose 9.0% YoY. Tier 1 revenue is generally from telecom (telecommunication) and cloud companies. In the Tier 1 segment, HPE is facing competition from Amazon (AMZN), Google (GOOG), and Microsoft (MSFT).
According to HPE, revenue growth will be driven by stabilization in the core server vertical. CFO (chief financial officer) Tim Stonesifer expects demand to improve marginally in the next two quarters. Revenue from HPE’s high-performance computing vertical rose 40.0% YoY in fiscal 3Q17 and 10.0% YoY after adjusting for acquisitions.
All-flash storage revenue also rose significantly along with revenue generated from hyper converge. Aruba drove HPE’s W-LAN (wireless local area network) revenue more than 30.0% YoY in fiscal 3Q17.