Hewlett Packard Enterprise FY 1Q16 Earnings Call Notes

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Hewlett Packard Enterprise (HPE) Margaret C. Whitman on Q1 2016 Results

Completed first quarter as independent company

“We’ve now completed our first full quarter as an independent company, and we’re off to a very strong start. We are already seeing the benefits of being a smaller, more focused and agile company across a number of fronts. Our customers and partners understand our strategy and appreciate working with a simplified, faster-moving organization.”

Azure is preferred partner for public cloud

“we announced a new partnership with Microsoft appointing Azure as a preferred public cloud partner for HPE customers while HPE now serves as a preferred partner in providing infrastructure and services for Microsoft’s hybrid cloud offerings.”

Macroeconomic environment still has pockets of weakness

“We like our product portfolio. We like our go-to-market changes. We like our innovation engine. There’s a lot of things that we’re feeling very good about, but the macroeconomic environment still has pockets of weakness. Russia continues to be a big challenge, the Ukraine, parts of Latin America. China right now for us is doing well, but that can change at any minute. So, we feel great about the stated goal of growth in constant currencies, and let’s see how the macroeconomic and sort of the political environment changes over time.”

We saw weakness in January

“the January weakness, we saw the last three weeks in January slow significantly in the United States, actually not that dissimilar from what I believe Cisco referred to on their call. And I don’t have a good explanation of that except for one or two things. One is, remember the opening week in the market in 2016 was really tough, right? And I think companies are quite now extra sensitive to volatility in the market. They are quite quick to be cautious and pull back purchases.”

February looks like it has returned to the linearity that we would have expected

“What I will say is, while I’m cautious about it, it looks like February has returned to the linearity that we would have expected. Oil and natural gas continues to be a bit weak, but there’s been some strength in other parts. So, I’m not quite sure what happened in those last three weeks, but that would be my guess.”

We have taken very different strategies from Dell

“it is interesting to note how different HP and Dell – we have taken very different strategies in this environment. There’s no question. And my view of this is predicated upon the speed that this market is changing. And so we decided to get smaller while they got bigger. We decided to lean into new technology while they’re doubling down on old technology in a cost takeout play. They levered up while we delevered. And we’re super-focused on being fast and nimble for our customers. So both strategies may work. I happen to like our hand better than the Dell-EMC hand.”

Companies older than 5-10 years are trying to figure out how to take existing infrastructure to the next gen of IT

“What we’re seeing from customers of all size, if your company is older than five or 10 years, you are trying to figure out how you’re going to take your existing infrastructure to the next generation of IT. And so this is part of the sale of – okay, you can get more out of your existing IT if you transform to a hybrid infrastructure, and this is one of the core hardware components and software-defined components that allows you to get the most out of this next generation of IT.”

Cloud infrastructure starts with an analysis of the apps

“what we’re hearing from customers is there is almost universal acceptance that their environments will be hybrid. And there’s almost universal acceptance that it has to start with an analysis of the apps. How many apps does the customer want to have? Is there opportunities to reduce the number of apps and consolidate? And then what instantiation do you want that app to be on? Some apps are going to stay locked down in a customer’s data center, untouched by anyone’s hand other than their own employees, but some apps will go to a private cloud on-prem, a virtual private cloud, a managed private cloud, and then obviously to the public cloud. And we’re seeing workloads move because even going from a traditional data center to the private cloud can be a 20% to 30% savings to a customer for that workload, which is meaningful.”

Last man standing in high performance compute

“So in a flat to declining market, which probably core servers are, at least over the next five years, we have to gain share, but there are real pockets of growth in the market as well. And HPC, by the way, high performance compute, we’re like the last man standing there and we’re investing in HPC and it’s a core competency for the company.”