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Hewlett Packard Enterprise Surprises With Positive Outlook

(Bloomberg) — Hewlett Packard Enterprise Co. gave an outlook for earnings that was better than Wall Street was projecting, signaling that the server maker’s extensive cost cuts are paying off.

Profit, excluding some items, will be 32 cents to 36 cents a share in the fiscal fourth quarter, compared with analysts’ estimates for 32 cents. For the full fiscal year, the San Jose, California-based company said it expects earnings per share of $1.30 to $1.34, beating projections for $1.20.

Chief Executive Officer Antonio Neri has spent more than two years trying to rekindle growth at the once-storied maker of complex computer systems. The coronavirus pandemic and resulting recession have largely sidelined those plans. For HPE, Dell Technologies Inc. and others, selling servers, networking gear and storage hardware is a cyclical business. Companies replenish their data centers with fresh equipment in good times and hold off during moments of uncertainty or economic crisis. Neri has tried to reduce HPE’s costs to get through this period, announcing in May a goal of at least $1 billion in gross savings by the end of fiscal 2022 through job cuts and other measures.

The efforts appear to be bearing fruit. At the same time, Neri said the company has “gained momentum in key areas.” While demand has stabilized, the products customers want most has changed, he said. Storage hardware for artificial intelligence and big data workloads have become more popular, for example.

“We executed well in Q3 despite everything going on, with a global pandemic and the uncertainty we’ve seen in the market,” Neri said in an interview. The company was able to reduce its order backlog “by more than $500 million,” particularly in servers.

In the three months ended July 31, sales fell 5.5% from the same period a year earlier to $6.8 billion, Hewlett Packard said in a statement Tuesday. Analysts, on average, had expected revenue of $6.08 billion, according to data compiled by Bloomberg. Profit excluding some costs was 32 cents a share, down from 45 cents a year earlier but beating the average projection for 23 cents.

HPE shares jumped 5% in extended trading after closing at $9.33 in New York. The stock has dropped 41% this year.

Server sales were little changed from a year earlier at $3.4 billion in the last quarter. Revenue from storage hardware fell 10% to $1.1 billion.

(Updates with comment from CEO in third paragraph.)

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