Making Markets EP19: Quick Take on HPE

In this Making Markets quick take, host Daniel Newman talks about HPE’s biggest challenges in the face of the pandemic, and how the company did still grow in spite of those challenges. We also dive into the business’s subscription model and CEO Antonio Neri’s big as-a-service pivot. The company is starting to see good results generating almost $800 million at a 36% growth rate of annualized revenue, their as-a-service orders on a year over year basis are up over 100%, and they’re targeting a multi-year — between FY21 and FY24 — of 35-45% for their recurring revenue category. Solid quarter for HPE, but of course everyone would like to see it grow faster.

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Transcript:

Daniel Newman: All right, let’s bounce over to HPE. Now we’ve all seen the big IT OEMs struggle to really show growth. That they all had probably some of the hardest headwinds in the pandemic. Because not only did they deal with chip shortages, but they also dealt with offices being closed. And when a big part of your numbers are infrastructure on prem, that has definitely been a bit of a pullback for the company. Now, the company did grow. It grew at a small percent, it was 1% growth, but it did grow. And at this point, that is what I am looking for. But the real story, if I have to get this into my two minute blitzes for these companies is all about the business’s subscription. That’s what I’ve been watching. So a couple years back, CEO Antonio Neri, who’s been on the show by the way, I recommend you check it out. He said, “We’re going to switch everything in the business to, as a service.”

And so he made this big as a service pivot. And so I’ve been watching that closely because the company’s ability to succeed with their GreenLake or software subscription as a service is going to be the difference between whether HPE emerges stronger or continues to have to fight a strong fight against the infrastructure providers. HPE was first into this space. It’s been very transparent and open and we’re starting to see good results. So they’ve now generated almost 800 million at a 36% growth rate of annualized revenue. They’re as a service orders on a year over year basis are up over 100%. And they’re targeting a multi-year between FY 21 and FY 24 of 35 to 45% for their recurring revenue category. This is going to be really important. The company’s going to have to execute this, have to move into the multi-billions because we are seeing more competition rising up from the likes of Lenovo with TruScale, Dell Tech and their APEX service, Cisco Plus.

And then of course, all the cloud providers, AWS, Azure, Google, Oracle are all offering on-prem services. However, having said that, I do believe HPE is doing well. They’re finding really specific workloads with companies like SAP and Splunk that they’ve been able to tap into to gain differentiation, continue to strong growth for their markets, and serving their customers. So solid quarter for HPE. But of course, everyone would like to see it grow faster.