Hewlett Packard Enterprise Company (NYSE:HPE) Q3 2018 Earnings Conference Call - Final Transcript

Aug 28, 2018 • 05:00 pm ET

Previous

Hewlett Packard Enterprise Company (NYSE:HPE) Q3 2018 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) Katy Huberty, Morgan Stanley.

Analyst
Katy Huberty

How much of the $0.07 [ph] EPS beat this quarter, would you attribute to operational or execution factors versus some of the one-time in tax benefits, and given the guidance increase just flows through that 3Q, why not assume that execution continues? And then I have a follow-up on servers.

Executive
Timothy Stonesifer

Sure. Thanks, Katy. So as far as the beat goes, I'd say $0.02 of that was operational, $0.03 was driven by some favorable OI&E, which was driven by primarily FX. And then another $0.02 was driven by the favorable tax rate, which is really just going to be a shift between Q2 or Q3 and Q4. Now, when you look at the total year though, going from the 140 to 150 up to where we are, I'd say $0.02 of that was the operational improvement in Q3, which to your point we passed through consistent as in prior quarters. $0.03 of that is the OI&E, one-time benefit, but we are flown through another $0.02 of operational improvements, because we do expect to continue to execute in Q4 along with a good market backdrop.

Analyst
Katy Huberty

And then as we think about the server business, will revenue growth in the foreseeable future come entirely from mix shift in AUP increases or do you have any line of sight into units stabilizing year-on-year or even returning to growth over the next year?

Executive
Antonio Neri

Yes. Good afternoon, Katy. This is Antonio. So yes, we expect to continue to grow the business despite the fact that we continue to de-emphasize or focus on that commoditized server business. And this quarter, as you can see, we grew the business 5% and if you take the Tier 1 up 10%. And that is why as because obviously the demand is there. And ultimately the strategic growth categories continue to grow at a healthy space, and we continue to gain share in that particular segment. And then last but the least, we have made structural changes in that AUPs, and maybe Tim can reinforce that comment, because he made the comment that 75% of that AUP increase was driven by structural changes.

Executive
Timothy Stonesifer

Yes. So again, our definition of structural is excluding everything that's associated with the pass through of increased commodity costs. So as you look going forward, I would expect to continue to see structural improvements primarily given by the fact that; one, we're going to continue to attach to richer configs, and if you look at the Gen10 server mix today, it's roughly just over 50% of the overall portfolio, so there's still room to grow there, so I'd expect that to offset any unit pressure that we see going forward.

Operator
Operator

Sherri Scribner, Deutsche Bank.

Executive
Andrew Simanek

I think she got disconnected.

Operator
Operator

Toni Sacconaghi, Bernstein.

Analyst
Toni Sacconaghi

It sounded like you felt you had a lot of profit tailwinds in the Hybrid IT segment this quarter, excellent execution on HPE Next, DRAM pricing environment better, structural price