HPE profits hit by weak demand for servers and networking equipment

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HPE profits hit by weak demand for servers and networking equipment

Hewlett Packard Enterprise, the corporate hardware and enterprise software business of Hewlett-Packard, forecast a current-quarter adjusted profit largely below analysts' estimates, sending its shares down 1.9 percent after the bell.

HPE said it expects first-quarter adjusted profit between 42 cents and 46 cents. Analysts on average had expected profit of 46 cents per share according to Thomson Reuters.

However, the company did beat analyst estimates for the fourth-quarter ended 31 October by 1 cent with earnings of 61 cents per share, excluding items.

Hewlett Packard Enterprise (HPE) also reported a 7.2 percent fall in revenue to US$12.48 billion in its first year as a stand-alone company, hurt by weak demand for storage and networking equipment.

Competition has been stiff as more and more businesses move to the cloud and boost demand for cloud-based services.

This has forced some traditional technology companies such as HPE to change strategies and focus their efforts on fast-growing hardware businesses such as servers, networking and data storage hardware for the cloud.

Under chief executive Meg Whitman, HPE has sold off most of its software businesses, including its computing services unit, since the company spun off from Hewlett-Packard in 2015.

Still, revenue in its enterprise group, the company's biggest business that offers servers, storage and networking services, fell 9.2 percent to US$6.68 billion in the fourth quarter.

Larger companies such as Cisco Systems and Dell EMC have well established cloud hardware businesses to compete with HPE.

Networking revenue slumped nearly 34 percent, hurt in part by a slowdown in spending by the government in educational institutions that hit demand for both wireless and switching devices.

Separately, HP Inc, the legacy printing business of Hewlett-Packard, forecast an adjusted profit for the current quarter that was largely below analysts' estimates due to waning demand for its printers.

HP Inc's shares were down nearly 2.2 percent after the bell.

(Reporting by Rishika Sadam and Sruthi Shankar in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

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