HP Enterprise Describes Financial Bumps From Spinoffs
October 18 2016 - 10:00PM
Dow Jones News
Hewlett Packard Enterprise Co. detailed some short-term pain it
foresees when two previously announced spinoffs close in the coming
fiscal year, but said its remaining businesses should grow slightly
regardless.
The company, created a year ago from the breakup of the former
Hewlett-Packard Co., on Tuesday reaffirmed its financial
expectations for the fiscal year ending this month at a meeting
with analysts in San Francisco. It also presented financial
projections for the coming 12-month period if its current structure
were unchanged.
Those predictions, which include a slight revenue decline, are
in line with Wall Street expectations. But the company's structure
is changing dramatically because of moves by Chief Executive Meg
Whitman to further narrow the company's focus.
In May, HP Enterprise struck a deal to spin off a computer
services business that employs about 100,000 people and merge it
with operations of Computer Sciences Corp. In September, the
company announced another deal to spin off and merge most of its
12,000-employee software operations with Britain's Micro Focus
International PLC.
Those deals are set to close in fiscal 2017. When that happens,
the two former operations will stop generating revenue while
incurring big one-time costs, said Tim Stonesifer, HP Enterprise's
executive vice president and chief financial officer.
As a result, HP Enterprise expects to report adjusted per-share
profit for fiscal 2017 of about $1.45 to $1.55. That compares with
per-share figures of $2.00 to $2.10 if those operations weren't
spun off, Mr. Stonesifer said.
The company's cash flow also will suffer because of a $2.5
billion payment to fund a pension plan associated with the services
business. But HP Enterprise still expects to return about $3
billion to shareholders in fiscal 2017 in the form of dividends and
stock repurchases, similar to the amount projected for the current
year.
Ms. Whitman's strategy of spinoffs leaves the company dependent
for much of its revenue on sales of server systems, networking and
storage devices. She and other executives said those businesses are
doing well and benefiting from greater attention from top
management and the company's sales force. Revenue from remaining HP
Enterprise businesses should grow slightly in fiscal 2017, the
company said.
She indicated that HP Enterprise won't shrink much more, at
least as far as those hardware business are concerned. "We think
the portfolio we have needs to be here and needs to stay together,"
Ms. Whitman said in response to a question Tuesday.
In an interview last month. Ms. Whitman estimated that the
company's workforce will have declined after the spinoff
transactions by some 50,000 to 60,000 employees from about 210,000
a year ago, when HP Enterprise was formed.
Write to Don Clark at don.clark@wsj.com
(END) Dow Jones Newswires
October 18, 2016 21:45 ET (01:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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