On Friday, in early trading, the shares of Hewlett Packard Enterprise rose by nearly 7%, after the company disclosed a share buyback program worth $7 billion, raised its profit forecast for the full-year and reported strong quarterly results. The price targets of HPE’s stock was raised by at least eight brokerages after the announcement. The results are the first under the leadership of Antonio Neri, who took over the position of Chief Executive Officer in February and replaced Meg Whitman. HPE has been making investments in research and cutting costs for bolstering its primary server business due to competition from non-branded and cheaper assembled servers.
Analysts have said that there have been some signs of improvement in terms of IT spending and a slowdown in spending related to cloud decisions. HPE joined Cisco, NetApp and IMB Systems in beating their revenue estimates in the most recent quarter. A computer engineer, Neri has worked with the company for over two decades. Whitman had announced a restructuring in October and Neri had been expected to lead that. Now, the new CEO is planning to win over investor confidence by increasing the dividend by 50 percent in the third quarter and completing the announced share purchase by the end of 2019.
Investors are most likely going to be pleased with the robust capital return program of the company, but some analysts said that this would compromise HPE’s ability to undertake larger M&A. In 2015, Whitman had decided to divide Hewlett Packard Co into HP Inc., the PC-and-Printer business, and HPE. The former has seen its share double during this time whereas HPE’s shares have experienced a 50 percent gain. For the second quarter, an adjusted profit of 29 cents to 33 cents per share were forecast by HPE, which were higher than analyst estimates of 26 cents per share.
Some experts said that the company had been very careful in not setting the bar too high for the rest of the year in terms of growth. However, they said that it could be a multi-quarter or even a multi-year trend, which would result in an upward pressure on estimates. Other than that, the recently disclosed security flaws, namely Meltdown and Spectre, which affected almost very modern computing device, is also going to work in HPE’s favor. Due to these vulnerabilities, there will be an increase in demand from customers using old servers as there will be a decline in performance with the installation of any software patches. At the end of the day, the share price of the company was around $18.55.
CEO Antonio Neri said that their strong performance in the first quarter was proof that they had chosen the right strategy and had improved its execution. He said that the revenue growth had been good across every segment and had been able to execute HPE Next without any disruptions whatsoever. The new chief executive is expected to arrive at the Mobile World Congress 2018, to be held in Barcelona, with a smile on his face due to the impressive financial results.