HPE’s second-quarter results fall short of forecast spurred by COVID-19 hit

Hewlett Packard Enterprise (HPE) announced its second-quarter results for the fiscal year ending April 30, U.S. time on May 21. The global economic lockdown, which has been going on since February, resulted in a lower-than-expected result. However, it said it had finished the second quarter with a robust backlog. HPE plans to reorganize the company’s growth areas and build a cost structure for the “new normal” through digitization and automation.

In the second quarter, earnings per share were 64 cents, down 16 percent year-on-year to $6 billion. Non-GAAP earnings per share were 22 cents.

Analysts had expected second-quarter revenue of $6.29 billion and non-GAAP earnings of 29 cents per share.

HPE revamped its business model and launched a loan program for customers in the quarter to address the economic impact of the new Coronavirus infection (COVID-19).

Antonio Neri, CEO of HPE, said: “The continued economic lockdown in the world since February has had a serious impact on second-quarter earnings. But at the end of the second quarter, we had a $1.5 billion order back, twice the average backlog of the past across our portfolio.”

The backlog refers to uninitiated services and undelivered products as of April 30, 2020, among confirmed orders in the second and earlier quarters of the 2020 fiscal year.

According to Neri, demand for HPE GreenLake services was strong, and the Intelligent Edge division grew 12 percent in North America.

HPE said it was hit by “supply chain constraints and delays in customer acceptance” resulting in delays in compute, high-performance computing and storage orders.

HPE was forced to struggle in all its business divisions. Sales in the Intelligent Edge division fell 2% year-on-year to $665 million, compute-related sales fell 19% to $2.6 billion, high-performance computing and HPC sales fell 18 percent to $589 million, and storage sales fell 16 percent to $1.1 billion.

HPE has said it will cut salaries for executives and directors and cut jobs in the wake of the poor performance. In addition to Neri, the company will reduce the base salary of executive vice president by 25¢. The base salary for senior vice presidents will also be reduced by 20¢, and directors will receive a 25% cut in annual cash compensation from July 1.

HpE said it would “reorganize the company’s growth areas” regarding the job cuts. Simplify product portfolios, marketing, supply chains, customer support, and real estate strategies. The plan will be implemented until fiscal 2022, with the aim of saving at least $1 billion by the end of fiscal 2022.