01—Abstract
Summary
Summary of the 10-K filed December 15, 2017. Cited figures are marked; the original filing is the authoritative source.
This 2017 10-K filing for Hewlett Packard Enterprise (HPE) highlights a year of significant transformation, marked by the strategic separation of its Enterprise Services and Software businesses.
These divestitures, completed in April and September 2017 respectively, have reshaped the company's operational focus and financial structure. The company is actively executing its 'HPE Next' initiative, a multi-year plan aimed at simplifying its operating model, streamlining offerings, and increasing investment in high-growth, higher-margin solutions. This initiative is expected to yield substantial cost savings by fiscal year 2020.
HPE's strategy revolves around three core pillars: making Hybrid IT simple, powering the intelligent edge, and providing world-class expertise and flexible consumption models through its Pointnext technology services. The Enterprise Group (EG) remains the primary segment, offering a broad portfolio of servers, storage, and networking solutions, supported by technology services.
The Financial Services (FS) segment continues to provide financing and IT consumption models, while Corporate Investments focuses on innovation and incubation projects. The company is navigating a dynamic IT landscape characterized by cloud adoption and intense competition, necessitating continuous innovation and strategic execution to maintain its market position.
02—Key points
Key Highlights
- Completed the separation of its Enterprise Services (to DXC Technology) and Software segments in April and September 2017, respectively.
- Launched the 'HPE Next' initiative aimed at simplifying operations, streamlining offerings, and shifting investments towards high-growth, higher-margin solutions, with expected gross cost savings of $1.5 billion exiting fiscal 2020.
- Strategic focus on three key pillars: Hybrid IT, Intelligent Edge, and expert technology services (Pointnext).
- Enterprise Group (EG) remains the core business segment, offering servers, storage, and networking solutions.
- Financial Services (FS) segment continues to provide financing and IT consumption models.
- Recognized $93 million in Disaster charges due to Hurricane Harvey.
- Invested in acquisitions during fiscal 2017, including Cloud Technology Partners, Nimble Storage, and SimpliVity, to bolster its portfolio.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Hewlett Packard Enterprise Co kept $0.01.
- Revenue$28.87B100.0%
- Cost of revenue−$12.71B44.0%
- Gross profit$16.16B56.0%
- Operating costs−$15.59B54.0%
- Operating income$564.0M2.0%
- Interest, other & tax−$220.0M0.8%
- Net income$344.0M1.2%
Where FY2017 revenue went
$28.87B- Cost of revenue: $12.71B, 44% of revenue
- Other operating costs: $9.09B, 31% of revenue
- SG&A: $5.01B, 17% of revenue
- Net income: $344.0M, 1.2% of revenue
- R&D: $1.49B, 5.2% of revenue
- Interest, other & tax: $220.0M, 0.8% of revenue
Kept 1.2% as net incomeNet income $344.0M · 1.2%Interest, other & tax $220.0M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed December 15, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $28.87B$30.28B | −4.7% |
| Cost of Revenue | $12.71B$13.04B | −2.5% |
| Gross Profit | $16.16B$17.24B | −6.3% |
| R&D Expenses | $1.49B$1.71B | −13.1% |
| SG&A Expenses | $5.01B$5.38B | −6.8% |
| Operating Expenses | $28.31B$26.38B | +7.3% |
| Operating Income | $564.00M$3.90B | −85.5% |
| Interest Expense | $599.00M$547.00M | +9.5% |
| Net Income | $344.00M$3.16B | −89.1% |
| EPS (Basic) | $0.21$1.84 | −88.6% |
| EPS (Diluted) | $0.21$1.82 | −88.5% |
| Shares Outstanding (Basic) | 1.65B1.72B | −4.0% |
| Shares Outstanding (Diluted) | 1.67B1.74B | −3.7% |
05—Questions
Frequently Asked Questions
What were the major strategic changes for HPE in fiscal 2017?
In fiscal 2017, HPE completed two significant strategic transactions: the separation and merger of its Enterprise Services business with Computer Sciences Corporation (DXC Technology) and the separation and merger of its Software business segment with Micro Focus. These actions have fundamentally reshaped the company's business focus.
What is the 'HPE Next' initiative, and what are its expected outcomes?
HPE Next is a strategic initiative launched in fiscal 2017 to architect a more purpose-built company by simplifying its operating model, streamlining business processes, and shifting investments towards high-growth, higher-margin solutions. The initiative is expected to be implemented through fiscal 2020, with projected gross cost savings of $1.5 billion and annual run-rate net cost savings of approximately $800 million exiting fiscal 2020.
How did the separations of the Enterprise Services and Software businesses impact HPE's financial reporting?
The historical financial results of the former Enterprise Services and Software segments have been reclassified to Net loss from discontinued operations in the Consolidated and Combined Statements of Earnings and to assets and liabilities of discontinued operations in the Consolidated Balance Sheets.
What are the main business segments of HPE following these separations?
Following the separations, HPE organizes its business into three segments: Enterprise Group (EG), which provides technology and services for hybrid IT and the intelligent edge; Financial Services (FS), which offers financing solutions; and Corporate Investments, which includes innovation and business incubation projects.
06—Continue