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What Factors Have Affected HPE’s Performance in Fiscal 2017

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Restructuring issues

Hewlett Packard Enterprise (HPE) split with HP (HPQ) in November 2015 to focus on core growth areas. Last September, HPE announced the merger and spin-off of its non-core software assets with Micro Focus. In May 2016, HPE merged its Enterprise Services business with Computer Science. HPE also announced the closing of its transaction with China’s (FXI) Tsinghua Holdings, and created the H3C Group.

According to HPE chief financial officer Tim Stonesifer, execution issues coupled with labor laws in Europe impacted HPE’s business performance. Stonesifer stated that “we’ve had some challenges on the go-to-market as we’ve been transitioning, and I think those are starting to get ironed out, we have folks that have been in their roles for a longer period of time, they know now, what they’re doing, very focused and I think, we saw some of that come through in the third quarter.”

Investors were initially optimistic about HPE’s restructuring programs, and the stock rose over 50% in calendar 2016. However, HPE stock has returned -1% in the trailing 12-month period.

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Pricing environment

HPE has claimed that the pricing environment was more challenging in the United States than in Western Europe and Asia. High component costs have impacted HPE’s profit margins in fiscal 2017. DRAM (dynamic random access memory) prices have risen 5%–10% every quarter since the start of 2017.

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