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HPE: Behind the Numbers: A look at Q1 2020 Financial Reports

NonStop Insider


HPE Mar 2020

As I read magazines over the weekend, there was an observation from a columnist about a future car from McLaren where the writer said, “McLaren is determined to maximize minimalism in the coming $1.7 million 804hp Elva.” Being discussed was the prospect that McLaren would be completely removing the front windscreen. If this reminds some of us of the famous quote of Lotus founder, Colin Chapman, who once said, “simplify, then add lightness” then I am not surprised. Together they represent a good way to introduce the subject of HPE’s latest financial results. On March 3, 2020, HPE released results for Q1, 2020, together with guidance about HPE’s upcoming quarters for the remainder of the year.

HPE provided a press release in which it called out a number of items that should be of interest to the NonStop community. It was hard to miss that today HPE is determined to “maximize minimalism” as it was transitioning from being a broad-based box company to being focused on value over volume. While this isn’t a surprise to the NonStop community it’s having an impact on HPE’s top line. However, once you look past the top line, as it’s being reshaped, you will see a renewed emphasis on reoccurring revenues (commonly associated with software vendors rather than box-sales vendors) as well as on data.

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As he went public, HPE CEO Antonio Neri viewed this as yet another strong quarter for HPE. According to the HPE press release, “HPE’s first quarter results demonstrate continued progress against our strategic priorities to shift our company to higher-margin and more recurring revenues against a dynamic market backdrop,” said Antonio Neri, president and CEO of Hewlett Packard Enterprise. “While our overall revenue declined for the quarter, primarily due to our Compute business, we grew our ARR by 19 percent and saw profitable growth in key areas of investment, including Intelligent Edge, High Performance Compute, Hyperconverged Infrastructure, Big Data Storage and Operational Services orders.”

One interesting development that showed up on the report was that HPE was now providing results for High Performance Compute & Mission Critical Systems (HPC & MCS). This is a relatively new development within the HPE organization and moves MCS and NonStop into the HPC organization. For this group, revenue was $823 million, up 6% year over year when adjusted for currency, with 6.0% operating margin, down 660 basis points (one basis point is equivalent to 0.01% -1/100th of a percent) from the prior-year period. HPC business continues to gain momentum with over $2.0 billion of awarded business expected to be delivered by FY23.

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In the afternoon of the day the financial results were made public, Neri appeared on the business news network, CNBC. Among the questions he faced were some that helped provide additional insights into where HPE was headed and what was central to its strategy and driving its own business goals.

CNBC – Any hesitations among customers to spend in the wake of shutdowns … or just global slowdown uncertainties?

Neri: “We see demand steady … obviously we continue to monitor the uncertainties around the globe …the reality is that customers are making critical investments to drive that acceleration of the digital transformation. And that is all driven by the fact that the data around us continues to grow and they need to extract the value of that data much faster than ever before.”

CNBC – Building out the intelligent edge in the increasingly digital world what do you think (of opportunity where privacy, security, hacking are considerations?

Neri: “We believe the edge is the next frontier; when we talk about the ‘enterprise of the future’ we see an edge-centric, cloud-enabled, data-driven enterprise. What this means is that the cloud is moving closer to where the data is created and that is being driven by the use-cases we see around us.”

CNBC – At a macro outlook: Growth opportunities?

Neri: “Data continues to outpace the compute capacity and that data is actually, (about)  75% of that data is created at the edge, so for me that’s very exciting and that’s why I am bullish about these edge compute capabilities that customers need going forward. So it’s just physics …”

CNBC wasn’t the only news outlet reporting on this latest quarter’s results. In Steven Burke’s March 4, 2020 article published in CRN, CEO Antonio Neri On Why HPE ‘Outperformed’ Dell, Cisco there were more than one highlight worth our attention –

Among growth areas for HPE in its first fiscal quarter ended Jan. 31 were high-performance compute and mission-critical systems, with sales up 6 percent; composable cloud, which was up 25 percent in the channel; and GreenLake pay-per-use services, which were up 48 percent.

“We outperformed every single competitor,” said Neri of the intelligent edge sales charge. “Everyone that was put in front of us we beat them this quarter. Cisco was down. Arista was down. Juniper was down. Ruckus was down. Ubiquiti was down. We were the only one that had a plus in front of it.”

What I am very pleased with is the momentum we continue to gain in key strategic areas. One of those areas is our pivot to as a service. That business continues to do extremely well.

If this news wasn’t what some financial analysts or industry commentators were anticipating, (even as Neri and the HPE executives are fully cognizant of the impact the implementation of HPE Next is having on the business), HPE is committed to remain focused on the digital transformation that is under way across the businesses HPE serves. However, just one day later, on March 4, 2020, HPE followed up with a big announcement that centered on its HPC & MCS organization.

As published later that day by Seeking Alpha:

Hewlett Packard Enterprise (NYSE:HPE) and Advanced Micro Devices (NASDAQ:AMDwin a $600M deal to deliver a supercomputer to the U.S. Department of Energy’s nuclear security arm.

The El Capitan supercomputer will be housed in the Lawrence Livermore National Laboratory in Livermore, California.

HPE expects the machine to have a speed of 2 exaflops, faster than the top 200 existing supercomputers combined.

HPE expects to deliver El Capitan in 2023.

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This goes a substantial way to confirm the upbeat statements made in the financial report – HPC business continues to gain momentum, with over $2.0 billion of awarded business projected by FY23.

Twitter and LinkedIn were quick with commentaries and promotions highlighting how the creation of this system will catapult HPE to the very top of the biggest supercomputers ever delivered anywhere in the world.

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The relevance of this to the new organization, HPC and MCS, shouldn’t be lost on any member of the NonStop community – this is the new home of NonStop. It would appear that organizationally, NonStop has landed in a group that understands the mindset of big sales even as it recognizes that NonStop was never “just another box sale.” Together with Cray and Superdome FLEX, NonStop is with the big systems group and not just as a converged system but as a virtualized system as well. At a time when indeed “the cloud is moving closer to where the data is created” isn’t it good to know that the ability to run NonStop at the cloud at the edge has the potential to leapfrog NonStop into even greater prominence among enterprise users.

To read the complete press release, just follow this link:

To review the slides that accompanied the press release, just follow this link: