Component shortages: HPE pushes up some hardware prices and as if by magic, reports 'record' gross margin in Q3
- Reference: 1630684813
- News link: https://www.theregister.co.uk/2021/09/03/hpe_q3_2021/
- Source link:
The biz last night reported sales of [1]$6.897bn for its Q3 ended 31 July versus $6.816bn a year ago - representing a rise of one per cent. This was still down on the $7.217bn HPE achieved in the [2]same quarter of pre-pandemic 2019 .
The largest division remained Compute, which recorded turnover of $3.104bn, down 9 per cent year-on-year. CFO Tarek Robbiati said this reflected normal seasonality “despite previously anticipated supply chain tightness”.
[3]
Intelligent Edge, HPE's strategically important unit, sold $867m worth of networking gear, up a whopping 23 per cent, which, along with HPC and Mission Critical Services (itself up 9 per cent to $741m) was one of two areas that actually grew beyond the sales reported in Q3 of HPE’s fiscal 2019.
[4]
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“Switching was up over 20 per cent year-over-year, whereas wireless LAN experienced more acute supply constraints and was up mid-single-digits,” said the CFO.
“We have, in this context where you have a constrained supply environment, to be very careful around managing to price. And we have taken action that is translating in this record level of gross margin of 34.7 per cent,” he added. A year ago, HPE's gross margin was 30.5 per cent.
[6]
Many networking businesses bemoaned the component conundrum this year, with Arista's CEO Jayshree Ullal, for example, saying she had [7]never witnessed a situation like in during her career, caused by massive demand for silicon. Cisco reckons [8]shortages are here until next year .
Robbiati added:
“AUP (average unit price) was up to mid-to-high single-digits quarter-on-quarter reflecting pass-through of commodity costs and richer configurations. As always, configurations that are richer play a big role in the AUP, but also pricing in this case. And units were flat quarter-over-quarter, given some expected supply chain constraints. So we feel pretty good about performance in computing.
[9]
“In the environment that we're operating in, the demand is very solid and with the supply constraints. We don't see them ending before the first half of calendar year '22. So we just have to navigate this as the capacity of all our manufacturing partners is not back to pre-pandemic levels, and that will still take a good 2 to 3 quarters," said the CFO.
HPE's storage business was up 1 per cent to $1.176bn but way down on the same quarter two years ago when turnover was $1.255bn. Financial Services was flat at $844m and the remainder of group's revenues was comprised of corporate investments.
[10]Nutanix mandates vaccinations for in-office workers, doesn't mandate going to offices
[11]HPE bags $2bn HPC-as-a-service gig with the NSA
[12]Dell, HP talk of backlogs and shortages as big PC-makers turn in their numbers
[13]'$6 in every $10' spent on cloud infrastructure is with AWS, Microsoft, or Google
[14]'This is the worst I've seen it' says Arista boss as entire network hardware sector battles component shortages, doubled lead times for semiconductors
Annualised run rate for HPE Greenlake grew by a third to $705m. HPE intends to sell [15]all of its kit as a service from next year.
Total costs and expenses fell to $6.615bn from $6.8bn, primarily via a reduction in the cost of goods manufactured. This partially offset by rise in selling, general and admin. Operating profit came in at $282m from $12m a year ago.
Lifted by tax indemnification and related adjustments and earnings from equity interests, net profit was $393m versus $9m a year ago. This compares favourably to the $134m loss HPE made in Q3 2019. ®
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[1] https://investors.hpe.com/~/media/Files/H/HP-Enterprise-IR/documents/q3-2021/q3-2021-quarterly-results.pdf
[2] https://www.theregister.com/2019/08/28/hpes_q3_financials/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YTKbJJ-g3mp08uefu7Dg7AAAAIE&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YTKbJJ-g3mp08uefu7Dg7AAAAIE&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YTKbJJ-g3mp08uefu7Dg7AAAAIE&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YTKbJJ-g3mp08uefu7Dg7AAAAIE&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2021/08/03/networking_vendors_hit_by_supply_chain_component_shortages/
[8] https://www.theregister.com/2021/08/20/cisco_q4_2021/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YTKbJJ-g3mp08uefu7Dg7AAAAIE&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2021/09/02/nutanix_q4_21/
[11] https://www.theregister.com/2021/09/01/hpe_hpc_nsa/
[12] https://www.theregister.com/2021/08/27/dell_hp_results/
[13] https://www.theregister.com/2021/07/30/q2_cloud_infrastructure_services_canalys/
[14] https://www.theregister.com/2021/08/03/networking_vendors_hit_by_supply_chain_component_shortages/
[15] https://www.theregister.com/2019/06/18/hpe_greenlake_by_2022/
[16] https://whitepapers.theregister.com/
Re: Silicon shortage
Edge case for sure, but I was looking into updating end of life for equipment for the company I work for. I had thought some of our Extreme Networks X670V 10G switches were going end of life next year, but I read the end of life notice wrong(one specific version of the switch goes EOL next year). Turns out they are going software end of life in 2023, and hardware end of life 2026. Which just blows my mind considering we bought some of them in November 2011(blows my mind as in I expected a shorter life span). I knew they were new at that time but I looked into it further and it turns out we bought them just 4 months after they hit the market. So just lucky timing to some extent I guess. I do have several 1G Extreme switches going EOL mid 2022, some of which will hit 10 years of operation in mid December.
I know 10G to many is old school, but at this rate I could run 10G for another decade and not need to upgrade. 40G uplinks from the 10G switches, super low utilization. Dedicated fibre channel network for storage.
By contrast, unlucky timing when our IT department bought a pair of Arista DCS-7050SX-72-F 10G switches several years later, they only had about 3-4 years until end of life/support at the time. I can only assume whomever sold them screwed them in that manor to get the cost down by selling an older model.
Until this company I hadn't worked at any company longer than about 3 years so never really had to be concerned about end of life. Here I am in this position for just over 10 years now, so end of life is certainly something I have to deal with now.
I have read bad stories mainly about EMC (though I'm sure others do too) jacking up the renewal prices for things to encourage customers to upgrade to the point where renewal support can cost almost as much as buying new. I haven't experience that with HP at least, going into the 5-7th year of support on several 3PAR systems and support costs have been fairly consistent. We do have an EMC Isilon system as well(very small) bought 3 years of support originally but moved to hardware only 3rd party on year 4, the EMC renewal cost wasn't too bad at that point just needed to cut some costs.
Never let a good crisis go to waste.
Dodged the gauge!
We ordered our gear back in April or so, and was delivered in July. I was quite happy with the old gear, but a certain giant virtualization software vendor won't support it any longer, and compliance on our part yada yada...
Silicon shortage
I have an idea to combat the silicon shortage: vendors could support their damn equipment for longer. We are having to replace some perfectly functional Cisco Catalyst 3750 switches with the new 9300 series because Cisco has arbitrarily decided that the 3750s are at the end of their lives and will no longer support them. Unfortunately, we need the switches to be supported because of the critical nature of the workloads used by them, but in practice these are mostly solid state devices which could last almost indefinitely.
HPE is on my "do not do business with" list for other reasons, but they certainly are guilty of the same behavior, arbitrarily refusing to support perfectly functional hardware of a certain age so that they can sell replacements.