HPE boss Antonio Neri has admitted that the tech giant is struggling as customers are slow to buy their networking gear.
He said the sales slump was worse than expected and warned that the problem would continue until 2024.
The confession came after HPE reported disappointing results for the year’s first quarter, with revenues down to $6.8 billion – well below the $7.07 billion analysts had predicted.
HPE shares dived four per cent to $14.65 after the news.
The networking nightmare comes just two months after HPE announced a massive $14 billion deal to buy Juniper Networks, a rival of Cisco, to dominate the AI networking market.
But HPE’s networking division, Intelligent Edge, saw only a modest three per cent growth to $1.2 billion, after a whopping 41 per cent rise in the previous quarter.
The company said things had grown fast for six months but had returned to normal.
Neri said HPE still gained market share in campus and branch networking and hoped to do even better with Juniper on board.
HPE also blamed the shortage of GPUs for hurting its sales. The former maker of expensive printer ink beat the earnings forecast by three cents, reporting 48 cents per share.
But it also lowered its outlook for the rest of the year, expecting zero to two per cent revenue growth, down from two to four per cent. It said its gross margin would be slightly down from the 35 per cent it had hoped for.
HPE’s CFO Marie Myers said they are taking action to cut costs and simplify its operations, while pursuing their long-term strategy.
One of the bright spots for HPE is its GreenLake cloud service, which saw a 41 per cent increase in annual revenue run rate to $1.4 billion, with networking, storage, software and services leading the way.
Neri said that a lot of their AI revenue is now coming from GreenLake, and they expect to grow it by 35 to 45 per cent in the future.
