HPE NonStop – one partner’s perspective

ETBC Edinburgh is now behind us and the NonStop community is onto digesting fresh news coming out of San Jose. The big news from HPE of late has been the release of its Q2, 2019, financial results. Together with additional commentary from the investor community, the news is pretty good although the overall impression given by investors was mostly a big yawn. In many ways, this is goodness in itself as HPE CEO, Antonio Neri, is given an opportunity to refashion HPE in ways that for many have been long overdue. From the HPE Press Release that accompanied the release of this latest quarter’s financials, Neri has reiterated that:

“We continue to make important strategic moves that further enhance our competitive position and ability to better serve our customers in a hybrid world. I remain confident that our edge-to-core strategy backed by the important investments we’ve been making will generate positive shareholder returns in the near and longer term.”

Nothing surprising to read here as it represents a continuation of previous Neri statements! Mostly, it’s just one more statement aimed at reassuring investors that the HPE executives know what they are doing and continue to execute to a plan. And that’s alright by me – the world is hybrid, there is a distinction between core / cloud and the edge and yes, there are enough funds to allow HPE to make further smart acquisitions. Actually, what really jumped off the pages were the moves to exit the low-value tier 1 (no-frills) server business in favor of the much higher margin enterprise server business:

“We grew in key businesses, including storage, high-performance compute, composable cloud, Aruba services and GreenLake orders. Strength in these areas partially offset continued intentional declines in Tier 1 sales …

“As we shifted to the mix of our portfolio toward higher value solutions, our underlying profitability improved across the board. From a macroeconomic perspective, we continue to see global demand driven by the need to process ever-growing amounts of data.”

There is risk in this approach however and HPE acknowledges that perhaps the enterprise turns to clouds more quickly than they expect, but in reality, there is time as the enterprise today is as risk-averse at it ever has been. Furthermore, with increased government pressure being exerted concerning company governance – security and privacy, cross-border movement of data, selection of communications equipment, etc. – the marketplace HPE is pursuing will be cautious in the steps it takes towards Hybrid IT with its growing reliance on private cloud deployments. No surprise really, but the big news, preceding the release of Q2 financials, was HPE acquiring Cray. When you look at High Performance Computing (HPC) where at the very top prices are extraordinarily high (along with the margins) I suspect this move of HPE was inevitable. According to CEO Neri:

“We are very excited about our intent to acquire Cray. As you know Cray is a premier provider of high end supercomputing solutions. I believe this acquisition will position us to tackle the most data intensive workloads in the high growth segment of high performance computing.

“HPC has been and continues to be a strategic focus area for HPE, and one where we have the clear differentiation. Customer benefits will include new offerings in AI, machine learning, analytics and new consumption models with HP GreenLake in the near future. Together, the companies can achieve greater scale by combining engineering talent and technologies and enabling R&D innovation leadership.”  

After all HPE had bought SGI to gain access to custom boards that helped accelerate the performance of its existing HPC products. As one HPE insider told me:

“As for Cray, it’s pretty exciting.  It will be integrated into the HPC team that pulled in the SGI teams two years ago, so now we’ll have the entire range covered, commodity HPC at the base – where HPE was always strong, the scale-up and mid-tier – where SGI had the lead, and the capability tier at the very top – where Cray has been successful with our US National Labs heading towards exascale.” 

Hybrid IT is still the biggest revenue generating business within HPE  and NonStop resides within Hybrid IT. While there were no references in the Q2 financials to NonStop the NonStop community got a pretty good insight into how the NonStop business is faring at ETBC event, jn Edinburgh. According to Neil Davis, Director NonStop Enterprise Division, EMEA, during his keynote address to the gathered attendees, “Business for NonStop in EMEA is off to a flying start in 2019” as some 21 countries took delivery of new NonStop systems – many of them first time customers of HPE NonStop products. Davis didn’t stop there, noting how it wasn’t just business as usual – shipping upgraded system to financial institutions (even as there were several of those on his list) – but to manufacturers in Russia and the Ukraine. “In 2018 we saw a strong uptake of the Integrity NonStop X: We passed the tipping point, NSX versus NSi,” Davis said in reference to one slide in his PowerPoint deck.

However, it was the opinion of one financial analyst that perhaps best summed up HPE’s performance with this post of May 28, 2019, Why Downtrend In Hewlett Packard Enterprise Will End:

“When Hewlett-Packard Enterprise reported strong second-quarter earnings that demonstrated the company is on the right track with its turnaround, the markets yawned. The results did little to end the downtrend. What are investors worried about, and what will it take to get the stock to bounce back?

 “By providing connectivity, security, analytics, and cloud computing, investors should expect margin improvements, EPS beating consensus, and solid cash flow growth. Strong revenue levels from Hybrid IT ensure HPE will continue buying back its shares.

 “Investors with the patience to hold the stock for at least 2-3 years will get rewarded as Hybrid IT and hybrid cloud leads the company’s growth.”

Encouraging news all around, whether you are in investor in HPE or not. Better still? NonStop, a participant in Hybrid IT, has found not only a home where it can add value, bringing with it a raft of blue-chip customers – not forgetting that one such blue chip customer is HPE IT. As a participant in Hybrid IT NonStop also provides an opportunity for businesses needing that extra layer of availability protection to integrate NonStop into their environment at either end of the Hybrid IT spectrum; Traditional or virtualized and there is no other mainstream vendor in a position to provide anything similar – HPE is doing the NonStop community a great service in morphing NonStop into what businesses want at a time when these businesses crave stability, predictability and above all, a partner that is headed in the same direction that they are headed!

All opinions and observations expressed here

are those of Pyalla Technologies, LLC,

and are not provided by HPE employees.