February 23, 2017 / 9:15 PM / 3 years ago

HP Enterprise cuts FY profit forecast, shares slide

(Reuters) - Hewlett Packard Enterprise Co, the corporate hardware and enterprise software business of Hewlett-Packard Co, cut its full-year profit forecast, as the company faces intense competition in its cloud-related business and struggles with a strong dollar.

FILE PHOTO - Signs for Hewlett Packard Enterprise Co., cover the facade of the New York Stock Exchange November 2, 2015. REUTERS/Brendan McDermid

The company’s shares were down 6.7 percent at $23 in after-market trading on Thursday. They have gained nearly 88 percent in the past 12 months.

HPE also cited higher commodities costs and some “near-term execution issues” for the cut in full-year profit forecast.

Since its separation from Hewlett-Packard Co in 2015, HPE has sold off most of its traditional software services, while building its cloud-related businesses, which has pitted it against much bigger and established companies such as Cisco Systems Inc and the Dell-EMC combine.

“I think (the cut) is a combination of increased pressure from foreign exchange movements as well as a highly competitive environment,” Edward Jones analyst Bill Kreher said.

About 61 percent of HPE’s revenue comes from outside the United States.

HPE said it expected full-year adjusted profit of between $1.88-$1.98 per share, down from the $2-$2.10 per share it forecast earlier.

Analysts on average were expecting a profit of $2.05 per share, according to Thomson Reuters I/B/E/S.

HPE also reported a revenue miss for the first quarter ended Jan. 31.

Revenue fell 10.4 percent to $11.41 billion, well short of the analysts’ average estimate of $12.07 billion.

“We saw significantly lower demand from one customer and major Tier 1 service provider facing a very competitive environment,” Chief Executive Officer Meg Whitman said on a call with analysts.

Revenue from its enterprise group, the company’s biggest and which offers servers, storage and networking services, fell nearly 12 percent to $6.32 billion in the quarter.

Excluding items, the company earned 45 cents per share, edging past estimates by 1 cent.

The Palo Alto, California-based company also forecast current-quarter adjusted profit in the range of 41 cents-45 cents per share. Analysts were expecting a profit of 47 cents.

HP Inc, which holds the hardware division of Hewlett-Packard Co, reported better-than-expected revenue on Wednesday, largely helped by a stabilizing PC market.

Reporting by Rishika Sadam in Bengaluru; Editing by Sriraj Kalluvila

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