01—Abstract
Summary
Summary of the 10-K filed December 12, 2018. Cited figures are marked; the original filing is the authoritative source.
Hewlett Packard Enterprise (HPE) filed its 2018 10-K report, detailing its business strategy, financial performance, and forward-looking initiatives.
The company is focusing on providing intelligent solutions from edge to cloud, aiming to accelerate customer business outcomes through digital transformation. Key to this strategy is the "HPE Next" initiative, launched in fiscal 2017 and expected to continue through fiscal 2020, which aims to simplify operations, streamline offerings, and shift investments towards high-growth, higher-margin solutions. HPE's business is organized into four segments: Hybrid IT, Intelligent Edge, Financial Services (FS), and Corporate Investments.
The company reported an increase in net revenue for fiscal 2018, driven by growth in its Hybrid IT and Intelligent Edge segments, partly due to favorable currency fluctuations and strategic acquisitions like Nimble Storage. The company also continues to return value to shareholders through dividends and share repurchases, indicating a commitment to financial discipline alongside strategic growth investments.
02—Key points
Key Highlights
- HPE is transforming its business through the 'HPE Next' initiative, focusing on simplification, streamlining, and investment in high-growth areas.
- The company operates across four key segments: Hybrid IT, Intelligent Edge, Financial Services, and Corporate Investments.
- Fiscal 2018 saw an increase in net revenue, largely driven by growth in Hybrid IT and Intelligent Edge, aided by acquisitions and favorable currency movements.
- HPE is committed to shareholder returns, with a history of increasing dividends and active share repurchase programs.
- The company is strategically positioned to address the evolving technology landscape, from edge-centric to cloud-enabled environments.
- Despite market shifts towards cloud, HPE's Hybrid IT segment, encompassing servers and storage, showed resilience and growth, particularly in core Industry Standard Servers and through the Nimble Storage acquisition.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Hewlett Packard Enterprise Co kept $0.06.
- Revenue$30.85B100.0%
- Cost of revenue−$14.08B45.6%
- Gross profit$16.77B54.4%
- Operating costs−$15.04B48.7%
- Operating income$1.74B5.6%
- Interest, other & tax$171.0M0.6%
- Net income$1.91B6.2%
Where FY2018 revenue went
$30.85B- Cost of revenue: $14.08B, 46% of revenue
- Other operating costs: $8.45B, 27% of revenue
- SG&A: $4.92B, 16% of revenue
- Operating income: $1.74B, 5.6% of revenue
- R&D: $1.67B, 5.4% of revenue
Kept 5.6% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed December 12, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $30.85B$28.87B | +6.9% |
| Cost of Revenue | $14.08B$12.71B | +10.7% |
| Gross Profit | $16.77B$16.16B | +3.8% |
| R&D Expenses | $1.67B$1.49B | +11.9% |
| SG&A Expenses | $4.92B$5.01B | −1.8% |
| Operating Expenses | $29.11B$28.31B | +2.9% |
| Operating Income | $1.74B$564.00M | +208.0% |
| Interest Expense | $631.00M$599.00M | +5.3% |
| Net Income | $1.91B$344.00M | +454.7% |
| EPS (Basic) | $1.25$0.21 | +495.2% |
| EPS (Diluted) | $1.23$0.21 | +485.7% |
| Shares Outstanding (Basic) | 1.53B1.65B | −7.1% |
| Shares Outstanding (Diluted) | 1.55B1.67B | −7.2% |
05—Questions
Frequently Asked Questions
What is the 'HPE Next' initiative and what are its goals?
The 'HPE Next' initiative, launched in Q3 fiscal 2017, is a strategic program designed to transform HPE into a purpose-built company that can effectively compete and win in its markets. Its goals include simplifying the operating model, streamlining offerings and business processes, improving execution, and shifting investments towards high-growth and higher-margin solutions and services. This involves consolidating locations, simplifying business systems, and migrating to a channel-only sales model in certain countries.
How did HPE's segments perform in fiscal 2018?
In fiscal 2018, HPE reported an increase in net revenue, driven primarily by its Hybrid IT segment (up 6.0%, or 4.1% constant currency) due to growth in Compute and Storage, and its Intelligent Edge segment (up 13.4%, or 11.2% constant currency) due to growth in campus switching and edge compute products. Financial Services also saw a slight increase in net revenue (up 1.9%, or 0.4% constant currency).
What is HPE's approach to shareholder returns?
HPE demonstrates a commitment to returning value to shareholders through dividends and share repurchases. In fiscal 2018, the company announced an increase in its regular quarterly dividend. Additionally, HPE repurchased approximately $3.6 billion of its stock under its share repurchase program and had a remaining authorization of $4.7 billion for future repurchases at the end of fiscal 2018.
What are the main risks HPE faces according to the 10-K?
HPE identifies several key risks, including the ability to successfully execute its go-to-market strategy and innovate new products, intense industry competition leading to price pressures, challenges in maintaining product quality, managing its complex distribution channels, and navigating global economic and political uncertainties. Other significant risks involve dependence on third-party suppliers, business disruptions, and the potential impact of cybersecurity threats and data breaches.
06—Continue