HP Enterprise’s raised outlook
Hewlett Packard Enterprise (HPE) increased its profit outlook for fiscal 2019, which ends in October, during the first-quarter earnings results. The maker of server computers now expects its adjusted earnings range to be $1.56 to $1.66 this year, higher than the previous forecast of $1.51–$1.61 per share thanks to the company’s cost-cutting measures and spending on new technologies. The average of the new guidance is also higher than the adjusted earnings of $1.56 per share in fiscal 2018. Wall Street projects adjusted earnings of $1.64 per share. For fiscal 2019, Hewlett Packard has re-affirmed its free cash flow guidance range of $1.4 billion to $1.6 billion, up over 35% from the prior year.
HPE’s efforts to cut costs
As an effort to cut costs, HPE’s chief executive officer, Antonio Neri, is reportedly trying to reduce the workforce and its global footprint to curb its expenses. The company is also making efforts to acquire and diversify into higher-margin businesses. The company has invested $4 billion in new technologies including edge computing, which is expected to generate returns over the next two years.
Earnings growth drivers
Apart from cost-saving efforts, the company is also relying on software-defined solutions, which is gaining traction and is expected to drive accelerated revenues from the second quarter.
The company didn’t meet its revenue expectations in the first quarter due to a decline in demand for servers. Juniper (JNPR) also missed its revenue estimates in the fourth quarter of 2018 amid weakness in its cloud business. The sluggish revenue growth in Cisco Systems’ (CSCO) second quarter of fiscal 2019 was due to the sluggish demand for its routers and switches.