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Hewlett Packard Enterprise Shares Decline Due to Impacted Forecast by US Tariffs

On March 7, Hewlett Packard Enterprise's shares dropped by 13% following the company's announcement that its annual profit forecast would be impacted by U.S. tariffs in a fiercely competitive market.

President Trump imposed 25% tariffs on imports from Canada and Mexico, with some exceptions until April 2, and additional 10% duties on Chinese goods, compounding the challenges faced by U.S. companies. Analysts warn that trade war uncertainties could have widespread repercussions, especially in technology and automotive industries.

HPE's CFO, Marie Myers, acknowledged the uncertainties caused by recent tariff announcements, particularly affecting the company's server business. She stated, "We are planning to mitigate these impacts through supply-chain measures and pricing actions."

HPE faces stiff competition from rivals Dell and Super Micro Computer. While Dell's shares fell by 2%, Super Micro Computer saw a 3% increase, with analyst Kinngai Chan suggesting that HPE will bear the brunt of the import tariff impact.

Super Micro sources parts from Asia for products assembled in the U.S., exposing it to imported sub-components tariffs. In contrast, Dell and HPE outsource manufacturing to Asia and Mexico, relying on providers such as Jabil, Celestica, Quanta Computer, and Wistron.

Companies like HPE, specializing in AI-optimized servers, are grappling with margin pressures due to high production costs and the shift towards more powerful chips. Analyst Eric Compton from Morningstar believes these challenges are temporary and anticipates a recovery in the fourth quarter after a rough second and third quarter.

Currently, HPE trades at 8.19 times its estimated earnings for the next 12 months, compared to Dell at 9.74 times and Super Micro Computer at 10.71 times.