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September 6, 2017

HP Inc vs HPE: The underdog comes out on top against the enterprise heavyweight

HPE makes a positive turn, but its less vaunted sibling is still coming out on top.

By James Nunns

It’s probably too early to say whether or not Hewlett Packard Enterprise (HPE) has turned the corner and will now go from strength to strength, but its 2017 Q3 results point to some light at the end of the tunnel.

At the end of April, HPE reported its Q2 financial results, with revenue from continuing operations dropping 13% to $7.74bn, down 5% year over year, fast forward to Q3 and HPE had turned the results on its head by reporting revenue of $8.2bn, up 3% from the previous period and 6% when adjusted for divestitures and currency.

Meg Whitman, CEO of HPE, called the third quarter results “an encouraging sign of the progress we are making,” and they are one of the first signs of progress but even Whitman admits there’s a lot more work to be done.

Whitman said: “With better execution we drove overall revenue growth, exceeded our EPS targets and improved our operating margins sequentially, all while completing the spin-merge of our Software business. There’s more work to do, but we are on the right track.”

Read more: HPE sales, revenues, profits decline – but it’s all part of the plan, says CEO Meg Whitman

With HPE just completing the spin-merger of its Software business with Micro Focus the results could look even better in the future. The software unit’s revenue was $718m, down 3% year over year, whilst financial services revenue rose 10% to $897m and the Enterprise Group was $6.8bn, up 3% year over year.

In November 2015 HPE and HP Inc. came into existence following the split of Hewlett Packard. The IT giant split into two smaller companies, but still remained large. The near two year time period that followed has seen turbulent times encapsulate the new entities, HPE more so than HP Inc.

Meg Whitman, HPEGiven that HPE has now sold large chunks of its business that were part of its original formation, it’s perhaps a little unfair to compare it to its now larger sibling – HP Inc.

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Bloomberg described the share of the business responsibilities as HP Inc. taking the “runt of the litter: printers and computers,” both of which are technologies that often have their demise written about, whilst HPE was “the privileged offspring,” taking on data centres, applications, and cloud technology – the cutting edge tech that’s shaping the future, not dusty old printers.

Whilst HPE has floundered and failed to live up to its promise, HP Inc. has put two fingers up to the doubters and continues to post better than expected financial results.

Towards the end of August, the “runt of the litter” posted third quarter net revenue of $13.1bn, up 10%, and while desktops sales fell 3%, the rest of the units all posted positive figures.

From being the runt of the litter to stealing all the plaudits, HP Inc. has surpassed its vaunted sibling HPE and what should have been the golden goose, has failed to lay a single egg.

The Q3 results are a first positive for HPE, but as Whitman says, “there’s more work to do,” a lot more.

 

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