HPE CEO Meg Whitman: Public Cloud Brings Pain And Gain For New HPE

Printer-friendly version Email this CRN article

Hewlett Packard Enterprise CEO Meg Whitman told Wall Street analysts Tuesday that at the same time public cloud is pressuring margins it is opening the door to new market opportunity for the independent hybrid cloud superpower.

"Public cloud infrastructure helps grow our TAM (total addressable market), but it does put some pressure on our margins," said Whitman. "We continue to manage this dynamic through business model evolution and cost structure improvements."

[Related: CRN Exclusive: Whitman On Her Vision For HPE, Private Equity's Impact, And How Long She Will Stay On Board]

Whitman said once the spin mergers of the enterprise services business and the software business are completed next year the $28 billion company will have a $250 billion total addressable market opportunity growing at 2 to 3 percent. That includes a $100 billion private cloud- data center  total addressable market growing at 1 to 2 percent.

Whitman's comments come with public cloud market leader Amazon Web Services (AWS), which has a revenue run rate of nearly $12 billion, reporting a whopping 58 percent increase in sales to $2.88 billion for the second quarter ended June 30 with operating margins of 30 percent.

With a full year contribution from both spin-ins, HPE expects combined fiscal year 2017 sales to be flat to down 1 percent when adjusted for divestitures and currency with non-GAAP earnings per share of $2.00 to $2.10 with a non-GAAP operating margin of 9.5 percent. HPE shares were up Wednesday 31 cents or one percent to $21.79 following the analyst meeting.

Whitman said HPE is seeing lots of customers  scale up with a public cloud and then make the decision to move to an HPE private cloud that delivers "public cloud economics in a private, on-premise solution" that provides the added benefits of "control, customization and security."  

Earlier this year, HPE singled out a breakthrough deal that led Dropbox to move some of its huge cloud storage services from Amazon Web Services (AWS) to a scalable HPE cloud solution.

Dropbox moved to a hybrid cloud model designed by HPE -- an "open architecture approach and a custom server solution" with HPE ProLiant and Cloudline service provider solutions -- all financed by HPE Financial Services.

Whitman said there are now a number of financial services companies that are now getting AWS economics with on-premises cloud solutions. "I am not saying that is going to stop (the public cloud) the trend by any stretch of the imagination, but there are now options that we have to present to customers that we didn't have a number of years ago," she said.

Printer-friendly version Email this CRN article