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Why Is HPE Optimistic about Its Technology Services Business?

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Nov. 29 2016, Updated 11:04 a.m. ET

Revenue fell 4% YoY

Revenue from Hewlett-Packard Enterprise’s (HPE) Enterprise Group segment fell 9% YoY (year-over-year). The Enterprise Group segment consists of the Servers, Storage, Networking, and Technology Services subsegments. 

Technology Services made up 27% of Enterprise Group in fiscal 4Q16, and revenue in this subsegment fell 4% YoY in the quarter. After adjusting for currency fluctuations, its revenue rose 2% YoY.

During HPE’s fiscal 4Q16 earnings call, the company’s CEO, Meg Whitman, stated, “Technology Services returned to growth in the last two quarters of the year and we expect that momentum to continue into FY 2017.”

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Market opportunity of $250 billion

Driven by advisory support and transformation capabilities in HPE’s Technology Services business and its financial services portfolio, Hewlett-Packard Enterprise has stated that its total addressable market is over $250 billion, with a CAGR (compound annual growth rate) of 2%–3%.

HPE has also stated that it’s targeting high-growth segments such as industrial IoT (Internet of Things), private cloud, and software-defined networking, among others.

In fiscal 2016, HPE bagged a large contract from a healthcare giant to provide technology services in automation and improve operating efficiency. HPE also stated that it would help the healthcare company to realign its core storage and computing platforms.

HPE’s Technology Services business also won five-year deals with a European (EFA) auto manufacturer and a large global bank in fiscal 2016.

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