HP Enterprise Is Moving to Houston From San Jose as Earnings Top Estimates

The enterprise-computing company posted October-quarter revenue of $7.2 billion, up 6% sequentially, flat versus a year ago, and above the Street consensus at $6.9 billion. Non-GAAP profits were 37 cents a share, ahead of both the guidance range of 32 to 36 cents a share and the Street consensus of 34 cents.

For the January quarter, the company is projecting non-GAAP profits of 40 to 44 cents a share, well ahead of the Street at 35 cents. Hewlett-Packard Enterprise (ticker: HPE) sees profits for the October 2021 fiscal year of $1.60 to $1.78 a share, above the previous consensus at $1.54. The company continues to project full-year 2021 free cash flow of $900 million to $1.1 billion.

HP Enterprise said revenue from its “intelligent edge” segment was $786 million, up 6% from a year ago, while High Performance Compute and Mission Critical Systems revenue was $975 million, up 25% year over year and 50% sequentially.

Compute segment revenue was $3.2 billion, down 5% from a year ago, and storage revenue was $1.2 billion, down 3%. Advisory and Professional services revenue was $245 million, down 9%, and Financial Services revenue was $849 million, down 3%.

On the decision to move its headquarters to Houston, HP Enterprise noted that the Texas city is the company’s largest employment hub. “Houston is an attractive market to recruit and retain future diverse talent, and is where the company is currently constructing a state-of-the-art new campus,” the company said. “The Bay Area will continue to be a strategic hub for HPE innovation, and the company will consolidate a number of sites in the Bay Area to its San Jose campus.”

The company said no layoffs are associated with the headquarters move.

“Hewlett Packard Enterprise finished the year with a very strong performance,” CEO Antonio Neri said in a statement. “In Q4 we saw a notable rebound in our overall revenue, with particular acceleration in key growth areas of our business.”

In an interview with Barron’s this afternoon, Neri said that no employees would be required to relocate to Texas, and he emphasized that the move wouldn’t result in any job losses. Neri himself plans to relocate to the Houston area.

He also said that the move has nothing to do with moving to a lower tax state, but instead reflects an opportunity to both “rationalize” its real-estate footprint and to expand non-technical staff in a better job market. He stressed that San Jose will remain a key technology hub for the company.

While acknowledging the company’s historic ties to Silicon Valley, Neri said that “we can’t hold ourselves to symbolic things. We need to optimize for our ability to attract and retain talent.”

HP Enterprise shares closed up 1.4%, to $11.20, on Tuesday, while the S&P 500 was up 1.1%.

In late trading Tuesday, HP Enterprise stock was off 0.6%.

Write to Eric J. Savitz at eric.savitz@barrons.com