HP Enterprise 3Q17 Earnings Call Notes

Meg Whitman

Industrial internet of things

“In the internet of things and in particularly the industrial internet of things, we see a tremendous opportunity as customers are looking to transform everything from retail environments to manufacturing floors.”

Uber is an interesting company

“listen, I thought, I was called in very late in the Uber search and I thought it was a very interesting business model to me. It’s actually quite similar to Ebay in many ways. It’s very disruptive, that relies on a community of drivers just like Ebay relies on a community of sellers and the growth prospects reminded me of Ebay in its early days and as you know, I am also an investor in Uber and – but, in the end that wasn’t the right thing.”

UK is challenged

“Yes, so, listen, I think when Brexit was first announced, we did see a pause in the demand in the UK market. No question about it because customers were trying to decide do they want to build their next datacenter in the UK or should they be building that datacenter someplace else in Europe. I think we are still feeling some after-effects from Brexit, because it’s not clear exactly how this is all going to work. So I would say, the UK market is a bit challenged for us. It’s not only Brexit, it’s also the public sector that is cutting back spending quite dramatically. So the UK is not one of our stronger markets. It’s a very important market for us. But I wouldn’t say it is doing as well as the rest of Western Europe and frankly the United States, Canada, Latin America and Asia are all outperforming the UK right now.”

Government shutdown is not our friend

“So, the federal business is an important part of our business in the United States. I think it’s roughly 10% to 15% of our revenue in the United States and we have an excellent position there. We’ve got longstanding relationships with almost every agency and every part of the federal government. So, a government shutdown would probably a blip honestly for us. There would be a speed bump there. What I will say is a lot of these purchases are long head, they buy and then the delivery is over a long period of time. So probably that would not – if there was a government shutdown in October, that probably wouldn’t affect us until a little bit later in 2018. But listen, the government shutdown I don’t think is our friend or anyone else who sells to the government. That’s not our friend and we certainly hope that will not happen.”

Tim Stonesifer

Competitive pricing in a challenging commodities environment

“From a macro perspective, we are seeing some overall improvement in the market, but continue to see competitive pricing in a challenging commodities environment. Currency remained unfavorable, but to a lesser extent than prior quarters with a 70 basis point year-over-year headwind to revenue in Q3. HPE’s performance in the U.S. excluding Tier-1 improved as core servers returned to growth and networking performance accelerated but storage remain challenged. Revenue in Europe has also returned to growth with strong results in Germany and broad stabilization across Western Europe. Asia Pacific similarly improved with double-digit growth in Japan, China and India.”

Harvey has had a substantial impact on our Houston operations

“Also, as Meg mentioned, Hurricane Harvey has had a substantial impact to our Houston operations. Our top priority has been ensuring the well-being of our employees during this challenging time. From a business perspective, we are continuing to assess the impact. Fortunately, we have a limited amount of production in Houston which we’ve been able mostly shift to other locations. So we don’t expect the disruption to our customer deliveries.”

Currency should become a tailwind in 2018

“The other thing that we should see some headwinds, although I am a little bit hesitant is foreign exchange. I mean, if rates stay where they are today and hold, then that would certainly provide some tailwinds for us. Now we’ll have to see what happens at the beginning of the year, but as I said, if they hold where they are today, that should provide some uplift.”

Full year impact of DRAM next year and a difficult pricing environment

“As far as some of the pressure points that we’ll continue to see, although DRAM may soften a little bit, just keep in mind, we are going to have a full year impact of that versus what we had this year. So we do expect that to be a significant pressure point going into 2018, when you compare year-over-year, I mean, DRAM cost will be roughly double. We are expecting and we will see what happens but we continue to expect to see a very difficult pricing environment. We are not anticipating that easing up in the near term. So that would provide some pressure and then we are obviously going to continue to invest in the business.”

Commodity cost pressure but will shift from high cost to low cost countries

“So, again, we are going to continue to see commodity cost pressure, one of the things you’ll see that we did very effectively with ES is we are going to hire people as we shift rules from high cost countries to low cost countries, we are going to be out hiring people and then we are going to continue to invest in the business. But net-net, it should drive some significant savings for the business going forward.”

Hewlett Packard Enterprise (HPE) Q2 2017

Meg Whitman – CEO

Strong demand for datacenter care

“We’re also seeing strong demand for our datacenter care as customers look to consolidate their datacenter footprints and flexible capacity, which delivers cloudlike consumption models with on premises solutions.”

They have a new prototype with powerful memory

“in May, we announced the latest milestone in our machine research projects, a powerful prototype that connects 160 terabytes of memory to 1,280 processor cores. In other words, an amount of memory that would hold 80,000 human genomes and simultaneously run anomaly detection algorithms on every core and while this is impressive, the most exciting thing about this milestone is that it demonstrates the ability to scale the architecture to a potentially limitless pool of memory, which is the secret to delivering scientific breakthroughs, industry-changing innovation or life altering technology for the mountains of data we create every day.”

Tim Stonesifer – EVP and CFO

A general outlook

“…we continue to see competitive pricing and a challenging commodities environment….The pricing environment was also increasingly difficult and hindered our ability to raise prices as an offset. We anticipate the impact from commodities will remain significant in the near-term”

Hewlett Packard Enterprise FY 4Q16 Earnings Call Notes

Hewlett Packard Enterprise’s (HPE) CEO Meg Whitman on Q4 2016

Uneven demand is a new normal

“Sure. So, listen, I would characterize this quarter as uneven global demand. But I have to say, I’ve been characterizing the last three or four years the uneven global demand. This feels like the new normal to me. There will be spots that do better, spots that are not as good as last quarter. And my view is, our performance is entirely in our own hands, yes, we’re influenced by the global demand.”

Tim Stonesifer

Keeping an eye on currencies

“Yes, sure. So, as far as Q4, we did see a little bit of that pressure, but not significant. But to your point, as you look, I mean, the currency environment has definitely been volatile in the last few weeks. And to your point, when you look at sort of where the rates are to-date versus where we guided, call it, mid-October, some of the rates are unfavorable. For example, if you look at the euro, the euro was at 110, and now it’s probably at 106, 107 something like that. So, given our global footprint that does put some pressure on the operations now. Having said that, it’s very early in the year and we do have some hedging programs in place. So we didn’t feel it was prudent at this stage to adjust our guide. And then in addition to that, the teams are being very proactive and very aggressive around the cost structure. There are also to your point in EMEA, we’re looking at opportunities to improve pricing to offset some of that pressure. So, I would just say this to wrap it up is, we’re keeping a close eye on the currencies. And at the same time we’re also implementing operational actions to help mitigate any pressure.

Hewlett Packard Enterprise (HPE) CEO Meg Whitman Interview

Hewlett Packard Enterprise (HPE) CEO Meg Whitman sees consolidation accelerating in the information technology outsourcing business

“This transaction unlocks value for both companies.  The new post-merger enterprise company will be a pure play industry leader which is important because I think the industry is going to consolidate and it’s important to get on the front of consolidation rather than the back end of consolidation.”

Hewlett Packard Enterprise (HPE) CEO Meg Whitman thinks her stock is undervalued

“There’s incredible value in our stock price.  As you know, Hewlett Packard Enterprise trades at a lower multiple than our competitors.  We are beating the competition now which was not true 4 years ago.  If you look at this most recent quarter, our networking business grew 18% while Cisco’s shrunk 3%.  We have gained share in external disk storage for 2 straight years while IBM, Dell, & EMC have all lost share.  We’ve gained market share in servers overall especially in density optimized and rack.  I feel very good about our core business.  We use a returns based capital allocation strategy so we look at all different ways to deploy our capital and right now we think our shares are a good buy and that we ought to continue to buy shares.”

 

Source: http://video.cnbc.com/gallery/?video=3000520536

May 25, 2016

Hewlett Packard FY 2Q16 Earnings Call Notes

Meg Whitman

Merging enterprise services business with CSC

“earlier today, we made a major announcement that we are planning a tax-free spin-off and merger of our enterprise services business with CSC, which is expected to create a pure play global IT services powerhouse with annual revenue of more than $26 billion. The new company will have more than 5,000 customers in 70 countries and employees in every region around the world. The transaction is expected to deliver approximately $8.5 billion to HPE’s shareholders on an after tax basis. ”

HPE will focus on next generation software defined infrastructure

“HPE will now have $33 billion in annual revenue and will focus on secure next generation software defined infrastructure that leverages a world class portfolio of servers, storage, networking, converged infrastructure as well as our Helion cloud platform and software assets.”

Helion platform will sit with HPE. Managed Cloud will sit with Enterprise Services

“the Helion cloud platform as whole will sit on the Hewlett Packard Enterprise side. So for example, private cloud, we’re the world’s leader in private cloud in our Helion cloud system platform that is built on open stack. And then of course the software business around CSA and other products in terms of one point of [indiscernible] to manage a multi-cloud environment, will sit with Hewlett Packard Enterprise. However, virtual private cloud and managed private cloud is today delivered by ES and in the future will be delivered by CSC ES. And we’re going to be working very closely together to make sure that there is a seamless offering in the marketplace when someone wants a private cloud plus VPC or MPC. And then obviously, we have a relationship with Azure, and CSC has relationship with AWS”

Will give us the opportunity to do business on HPE side with some of ES’ competitors

“On the other side of it is, we do business today with some of ES’s competitors, think about Deloitte or Accenture or Capgemini or the Indian players, and we want to continue to grow that. And they are just like — for Mike, there is a benefit to being a pure play that will be benefit for us in terms of being, primarily a software-defined infrastructure company and software company. So, we imagine growing the business with those players as well.”

Objective of HPE standalone will be helping customers to modernize their IT spend

“the objective of standalone HPE will be all about helping customers optimize and modernize their traditional IT spend, which by the way is still 88% of the spend in the marketplace, and transition to a multi-cloud environment and also deploy obviously the software assets.”

Mike Lawrie

New company will be a global leader in IT services

“Both of our companies separated last year, within a month of one another into more client-focused pure-play entities, aimed at specific markets and core industries. And today’s announcement, the coming together of these two organizations is the next logical step, building on their progress to-date and significantly accelerating their transformation. The new company will be a global top three leader in IT services, one that’s uniquely positioned to lead clients in their digital transformations. Our organizations are highly complementary.”

Hewlett Packard Enterprise FY 1Q16 Earnings Call Notes

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.”