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Whitman acknowledges 'Brexit effect' in earnings call

The effects of Brexit and public sector spending cuts are still being felt

HPE performed better than expected in Q3 2017, with overall revenue growth of three per cent; but away from the earnings, CEO Meg Whitman and CFO Tim Stonesifer shared some interesting tidbits about UK performance in the follow-up conference call.

Confidence might be starting to return to the UK economy, following the Brexit vote last year, but HPE is still feeling the effects. Whitman confirmed that there had been a demand slowdown, "because customers were trying to decide [whether] they want to build their next datacentre in the UK or should they be building…someplace else in Europe." She added, "[I]t's not clear exactly how this is all going to work… I would say, the UK market is a bit challenged for us."

The impact of public sector spending cuts was also felt by HPE. On top of Brexit, that meant that the UK - while still important - "is not one of our stronger markets." The rest of Western Europe, the USA, Canada, Asia and even Latin America are all outperforming the country.

On the server side, Whitman said that HPE is "cautiously optimistic," and that Gen-10 is "a real opportunity for us." However, commodity pressure and currency are creating "a very competitive pricing environment," and challenges remain in the market.

The company's digital transformation, HPE Next, will lead to a significant trimming of products on offer, Whitman said. HPE will reduce the number of SKUs and options, making servers "easier to sell and faster to configure."

Whitman also suggested that HPE Next could lead to a reduction in the company's markets: "Like most companies, a small number of countries account for the vast majority of revenue and profit and will account for the growth in our industry over the next five to ten years", she said, "and we want to make sure we are allocating the resources correctly to the largest countries with the countries that have the most growth and profit potential for us."

As well as the overall three per cent rise, HPE raised its storage and networking revenues by 11 per cent and 16 per cent, respectively, in Q3. Software (recently spun out of HPE in a merger with Micro Focus) was down three per cent, and financial services up 10 per cent.

The full transcript of the call can be found on Seeking Alpha.

Whitman acknowledges 'Brexit effect' in earnings call

The effects of Brexit and public sector spending cuts are still being felt

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