Hewlett Packard Enterprise Co. Shares rose as much as 8% in afternoon trading Tuesday after reporting revenue that beat Wall Street estimates, but the company warned of softness in the computer and storage markets in the third quarter.  The results, which included a decline in revenues, further illustrate the difficulties hardware manufacturers face in weakening world economies and uncertainty surrounding the US-China trade war. NetApp Inc. & # 39; s
disappointing results earlier this month raised alarms among many analysts.
Read more: NetApp share plunges 1
Trade tensions have contributed to uneven demand in enterprise IT sales, said HPE CFO Tarek Robbiati to analysts in a conference call after the results were released. Customers take longer to determine their investment strategy, he said.
"It's time we asked for a new reality. The days [robust growth] in 2017-8 no longer apply," Robbiati told MarketWatch in a telephone interview. "The sales cycles are elongated. The bigger the deal [IT] the more control becomes the deal. ”
The San Jose, California-based company
reported 45 cents non-GAAP earnings per share. But revenue slipped 7% the year before to $ 7.22 billion. Analysts polled by FactSet projected earnings of 40 cents per share and revenue of $ 7.275 billion.
Sales for several key product segments decreased. Server revenue dropped 12% and storage hardware dropped 5% compared to the same quarter a year ago.
Revenue for Hybrid IT, which includes the company's servers and storage hardware products, led to $ 5.5 billion, while HPE continues the transition to become a software-as-a-service company by 2022. HPE's Nimble Storage improved 21% the year before when it was adjusted for currency.
"We transfer the portfolio [product] to higher margin deals," HPE Director Antonio Neri said during the conference call, noting improvements in gross margins to 33.9%, up 340 basis points from a year earlier. The company lifted full-year guidance to $ 1 , $ 72 to $ 1.76 per share, excluding certain items. Analysts asked by Refinitive expect $ 1.68 per share.
Volatile results are nothing new for HPE, which was formed in November 2015 after it split. from Hewlett-Packard Co. Along the way, it bought flash manufacturer Nimble Storage for $ 1.2 billion in 2017 and announced plans to buy Cray super data company Cray for $ 1.3 billion in May, last year, HPE rolled out GreenLake Hybrid Cloud, a cloud management service which is interoperable with Amazon.com Inc.s
Amazon Web Services, Alphabet Inc. & # 39; s
Google Cloud and Microsoft Corp.
MSFT, + 0.21%
"HPE continues to drive solid profits and growth in select high-growth areas such as edge computing and networking, and HPC [high-performance computing]," Patrick Moorhead, principal analyst at Moor Insights & Strategy, told MarketWatch. Now the company needs to focus on increasing the size of these growth areas to drive overall sales growth. [SaaS] could well be that catalyst. "