Were you to have been asked that question some years ago, the answer most likely would have bee “I’m not sure”....
Social Media Round-Up
There have been numerous posts and tweets coming from the NonStop vendor community following RUG events worldwide: ETBC, Scotland; NYTUG – New Jersey; LATUG – Colombia and Chile –you can read more about these successful events in the HPE RUGs gain momentum – May Update included in this month’s issue of NonStop Insider. There was a lot of publicity given to HPE’s decisions to acquire Cray – something touched on elsewhere in this issue that will be the topic of more conversations in the months ahead.
However, it was the posts and tweets that followed HPE’s release of its Q2 2019 financial results that gained a lot of attention across social media channels. These commentaries began showing up almost as soon as the HPE call to financial analysts was completed, with the first being a blog post of May 28, 2019 by Chris Lau to the digital site, Seeking Alpha – Why Downtrend In Hewlett Packard Enterprise Will End. I have referenced Lau in the past, as he is one that pays attention to what HPE CEO, Antonio Neri, is delivering in terms of both the financial year and beyond:
“When Hewlett-Packard Enterprise (HPE) reported strong second-quarter earnings that demonstrated the company is on the right track with its turnaround, the markets yawned.
“The company is delivering on what customers demand the most. 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.”
The operative word here is turnaround – something we have all been observing for some time as a NonStop community. Quite simply, the HPE we see today is a vastly different company to when Neri took over just a year ago. But note, too, the reference to the strong revenue levels from Hybrid IT where NonStop resides as an organization. However it is one of Lau’s closing remarks provided as “your takeaway” that says much of where HPE is headed:
“Hewlett Packard Enterprise catches my interest because the market is punishing it for its slow revenue growth. Investors with the patients to hold the stock for at least 2-3 years will get rewarded as Hybrid IT and hybrid cloud lead the company’s growth.”
When it comes to the reference to its slow revenue growth, it was another post that caught my attention as well. It also appeared in Seeking Alpha and was published on May 30, 2019 – Hewlett Packard Enterprise: Boring Can Be Good. Posted by High Watermark Investment, who happens to be long on HPE, makes the important observation of how:
“The Hybrid IT portfolio is geared towards the data center infrastructure market and includes servers and storage solutions. In the first quarter of fiscal 2019, HPE transferred its data center networking business from the Hybrid IT segment to the Intelligent Edge segment. Also, edge compute business from the Intelligent Edge was pulled into Hybrid IT.”
For the NonStop community the important observation here is one we have all been witnessing first hand – HPE’s focus on the data center and in particular, the data center infrastructure market. The reason for this has to do with margins and to some extent, the degree of difficulty this entails. It’s hard business selling and installing complex data center systems, but doing so well can generate the kind of returns that guarantees further investments being made in NonStop.
However, the authors of this post continue with topics with which we may not be familiar:
“Hybrid IT also includes Pointnext, HPE’s professional services arm that enables IT transformation projects. Pointnext also houses one of HPE’s fastest-growing businesses, GreenLake. GreenLake is HPE’s subscription-based offering for using HPE’s IT offerings on-premise.”
The authors then highlighted the turnaround that is in the works as of right now:
“Realizing the complexity and the geographical spread of its business HPE had put in a long-term program (HPE Next) to streamline its operations by taking steps such as pruning the number of countries HPE operates in, streamlining the company’s manufacturing and support locations, focusing on channel-only mode etc. by 2020 with an objective to execute on the following strategy:
‘leveraging our existing portfolio of hardware, software and services as we deliver Hybrid IT solutions to our customers and power the intelligent edge that runs campus, branch and Internet of Things applications.’”
For many of us who are just coming to terms with the many references to PointNext being made by HPE, including by HPE NonStop managers, the reference to GreenLake – a subscription-based offering for using HPE’s IT offerings on-premise – will warrant closer attention as at some point in the future, based on the demand coming from those purchasing data center infrastructure, NonStop’s push to a consumption model may see some overlap develop.
Turnaround happening at HPE? Perhaps even more interesting are the observations that HPE has pivoted and is headed in a new direction, thanks to the success of Neri’s strategy. In commentary just posted by CRN’s Steven Burke on June 3, 2019 – Antonio Neri On Why He Is ‘Proud’ Of HPE’s Financial Performance In Light of Dell, Nutanix Quarterly Results, Burke opens with:
“Although the global economy and geo-political situation are a factor, Neri said HPE’s results are showing a pronounced shift to high margin growth segments of the market. That shift includes a 25 percent increase in high performance compute sales; a 78 percent increase in Synergy composable cloud sales; a 25 percent increase in SimpliVity hyper-converged sales; and a five percent increase in storage sales. ‘When you look at our financial performance and the pivot it is working,’ said Neri.”
Still wondering why the NonStop team is investigating and testing NonStop with Synergy, as has been discussed now for a year since the efforts were disclosed during the pan-European GTUG event held last year in Leipzig, Germany? Wondering too about the references then to GreenLake as well as the tie-in with PointNext? Perhaps this will have us all thinking:
“HPE’s GreenLake pay-per-use model, which provides a public cloud consumption experience on-premise, meanwhile, had its largest quarter ever with a robust 39 percent sales growth. ‘We have been on a journey for the last six quarters to transform our portfolio and pivot to areas we believe are relevant to our customers and ultimately are relevant for our partners to continue to accelerate profitable growth,’ Neri said.”
Turnaround? Transform? Pivot? Yes, Tier 1 sales have been wound down in favor of more profitable data center infrastructure pursuits – but HPE isn’t pursing success in data center infrastructure along traditional sales lines but rather, via new models offering better financial terms. The pay-as-you go with no capital outlay, leasing, if you like, as much compute, storage and networking as you need.
Yes it’s all changed. With HPE Discover on the horizon, it is expected that HPE will provide more information about the specifics on some of these programs. However, no matter what is raised in the coming months, it looks good for NonStop having made the transition to virtualization, NSaaS (thanks to HPE IT) and consumption pricing. Who would have guessed we would have come this far in just over a year!
Aren’t you pleased NonStop has made a pivot just as significant as HPE has done – looking forward to providing more coverage following HPE Discover!