HP Enterprise Gives Upbeat Profit Forecast as Cost Cuts Continue

(Bloomberg) -- Hewlett Packard Enterprise Co. gave a profit forecast for fiscal 2020 that topped Wall Street estimates, signaling the server maker’s cost cuts are continuing to pay off.

Profit excluding some items will be $1.78 to $1.94 per share, the San Jose, California-based company said Wednesday in a statement. Analysts on average were predicting profit of $1.80 a share in fiscal 2020, according to data compiled by Bloomberg.

HPE Chief Executive Officer Antonio Neri is tying to increase sales by moving the server maker to a subscription business model. By 2022, all HPE hardware and software will be available as a service or via a pay-per-use model. The company recently bought Cray Inc. to bolster its position in the supercomputer market. HPE has cut expenses, including the size of its workforce, as part of a restructuring meant to modernize the company and boost its profit margin.

HPE also projected fiscal 2020 free cash flow of $1.9 billion to $2.1 billion. The company expects to return 50% to 75% of that to shareholders, through buybacks and dividends. The hardware maker expects to boost its operating profit by 4% to 6% over the next fiscal year.

HPE shares were little-changed in extended trading after closing at $16.02 in New York. The stock has increased 21% this year.

In August, HPE gave a rosy profit forecast, even as sales fell 7% in the period that ended July 31.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Alistair Barr, Mark Milian

©2019 Bloomberg L.P.