HPE CEO Meg Whitman To Redouble Channel Efforts After Q1 Sales Drop, Making Sure Synergy, Arista, SimpliVity Are Top-Of-Mind For Partners
Hewlett Packard Enterprise CEO Meg Whitman Thursday told CRN that she is set to "redouble" her channel efforts after HPE posted a 10 percent drop in sales for its first fiscal quarter, ended Jan. 31.
"I am redoubling my efforts on the channel," said Whitman, noting that she recently met with $14 billion solution provider behemoth CDW and called the top 10 HPE channel partners. "I am going to be spending a lot more time with the channel. I want to make sure they are embracing not only the core ISS (industry standard servers) and 3Par, but they are embracing Synergy which is a big opportunity for the channel."
Whitman has called the new Synergy systems – billed as the industry's first composable infrastructure that brings private cloud infrastructure to customers with public cloud prices – as the biggest HPE breakthrough in the last decade. "That is a big opportunity for the channel because you can just go and refresh HPE's existing installed base of blades," said Whitman. "The next place you go is after (Cisco) UCS (Unified Compute System), and then the third place you go is to use it as a hunting license because it is a brand new, no one else has this product category. It is a fantastic hunting license. Anyone will take a meeting to understand Synergy."
Whitman said she is also making sure the channel is aggressively moving to sell the HPE Arista data center switching product, and the new SimpliVity converged infrastructure portfolio. "I just need to get out and explain it to the channel partners, making sure that they are embracing it and making sure that we are doing everything we can to help them … I have been doing separation, some M&A, running around. I am back to my first love: the channel."
HPE closed the $650 million SimpliVity acquisition just last week with the first product- a converged infrastructure offering on HPE's most popular server line – the DL380 – set to be released in May. "SimpliVity is a big, big opportunity for the channel," she said. "That is a $2.5 billion market growing at 25 percent compound annual growth rate."
The preferred data center switching reseller agreement with Arista, which was announced last fall, is also a top HPE channel priority. "Arista has no channel presence," said Whitman, noting that the software-defined data center superstar has grabbed 13 points of share from Cisco in the last two years. "We are their vehicle into the channel."
Whitman's channel charge comes after the company posted a 10 percent drop in sales to $11.4 billion for its first fiscal quarter ended Jan. 31, compared with $12.72 billion in the year-ago period. The Wall Street consensus was sales of $12.07 billion, according to analysts polled by Thomson Reuters.
HPE's mainstay Enterprise Group sales were down 12 percent in the quarter to $6.32 billion compared with $7.18 billion in the year-ago period. Server sales in the quarter were down 12, while storage sales were down 13 percent.
The sales shortfall sent HP shares down 7 percent or $1.63 to $23.03 in after-hours trading even though the company beat consensus non-GAAP diluted net earnings per share estimates. HPE reported nonGAAP diluted net earnings per share of 45 cents per share, up one cent from the Wall Street consensus of 44 cents per share, according to Thomson Reuters.
HPE said it was hit hard in the quarter by higher memory prices, foreign currency impact, sales execution in Enterprise Group and lower than expected demand from a tier one cloud service provider. As a result, HPE reduced its full fiscal year earnings per share estimates by 12 cents per share. HPE said it now expects non-GAAP diluted net earnings per share for the current fiscal year to be in the range of $1.88 to $1.98.
Whitman, for her part, said HPE could return to growth in fiscal 2017 as a standalone company – once it completes the spinoff of its Enterprise Services and software businesses – if not for the tier one cloud service provider – a major customer- that is slowing down orders "dramatically."
"For the rest of the business- x that large single tier one service provider- I think we have set ourselves up well to be prepared to tackle the future," said Whitman. "I like our portfolio. We have really reshaped this portfolio both inorganically as well as organically."
Raymond Tuchman, CEO of Experis Technology Group, a fast-growing Potomac, Md.-based HPE private cloud powerhouse with its own 80,000 square-foot cloud services data center, said he remains confident in HPE's ability to execute.
Experis Technology Group's HPE business is up considerably as a result of the company's ability to deliver converged private clouds that are, in some cases, less than half the price of operating on Amazon Web Services, said Tuchman.
"We expect to have a very good year," said Tuchman. "We are seeing a lot of CFOs and IT directors who are looking at the cost of private cloud versus AWS. We just put a proposal in front of a large finance organization that was looking at AWS at $159,000 per month versus $60,000 a month for private cloud. It is fiscally responsible to look at the difference. Everyone is trying to cut costs. If you have an IT environment where workloads are going up and down, and you don't have a clue – public cloud could be a good avenue. But if you know what your environment is and you are stable with processing, storage and network consumption private cloud is the only way to go."