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By Jaspreet Singh
(Reuters) -Shares of Hewlett Packard Enterprise fell 13% on Friday, after the AI-server maker said its annual profit forecast would be hit by U.S. tariffs in an intensely competitive market.
U.S. President Donald Trump imposed 25% tariffs on imports from Canada and Mexico, but exempted some goods from the countries under a North American trade pact until April 2. His additional 10% duty on Chinese goods — on top of the 10% tariff levied on February 4 — took effect on Tuesday.
HPE's comments show tariffs are already affecting U.S. companies. Analysts have said trade war uncertainties could cause prices to rise, including in technology and autos sectors.
"Recent tariff announcements have created uncertainty for our industry, primarily affecting our server business," CFO Marie Myers said on Thursday. "We are planning to mitigate these impacts through supply-chain measures and pricing actions."
HPE is set to lose more than $3 billion in market value, if losses hold. At least five brokerages have cut price targets on the stock after the results.
HPE would also cut jobs amid competition from rivals Dell and Super Micro Computer. Dell shares fell 2%, while Super Micro Computer was up 3%.
"HPE will be most impacted at the moment followed by Dell and lastly, Super Micro Computer in terms of import tariff impact," Kinngai Chan, analyst at Summit Insights Group, said.
Super Micro assembles products for the U.S. customers in San Jose, but sources parts from Asia, so tariffs affect the imported sub-components, Chan said, while Dell and HPE outsource their manufacturing services in Asia and Mexico.
They rely on electronic manufacturing services providers such as Jabil and Celestica and Taiwan-based original design manufacturers like Quanta Computer, Wistron for product integration.
The companies that sell AI-optimized servers, including HPE, are facing margin pressures due to costly production and rapid transition to the demand for more powerful chips.
"Our impression is that these are temporary issues. After updating our forecasts, we expect a rough second and third quarter, but a recovery in the fourth quarter," Morningstar analyst Eric Compton said in a note.
HPE trades at 8.19 times the estimates of its earnings for the next 12 months, compared with 9.74 times for Dell and 10.71 times for Super Micro Computer.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shilpi Majumdar, Alan Barona and Arun Koyyur)
