Hewlett Packard Enterprise CEO Antonio Neri Tuesday told Wall Street analysts that the ambitious Next initiative to rearchitect the company is the ultimate competitive weapon in a market moving at lightning speed.
"To me this is going to be the competitive advantage that Hewlett Packard Enterprise will have going forward," said Neri in a conference call with analysts after the hybrid IT-intelligent edge powerhouse posted 10 percent sales growth for its second fiscal quarter ended April 30. "For me this is not just a way to return shareholder value but really to improve the way we execute our business every single day."
In an interview with CRN after the conference call, Neri said the benefits of HPE's Next intiative goes far beyond cost savings of $250 million this year and $1.5 billion over the next three years. "What excited me about Next is the ability to transform the company from within and create a competitive advantage for our business," he said. "When you grow up in this company for 23 years, unfortunately you know every system, every process, for good or bad. That gives me a sense of where we need to accelerate."
Since Neri took the helm of HPE on Feb. 1, he has put the pedal to the metal on the Next drive to accelerate innovation with the acquisition of three companies in the last two months: Plexxi, a software-defined virtualizaton networking fabric provider; Cape Networks, an artificial intelligence network analytics provider; and Red Pixie, a cloud consulting company that specializes in Microsoft Azure.
"This is rearchitecting the company to deliver on our vision and strategy," said Neri. "At the core of this is not just cost savings. It is all about simplification, innovation and execution."
Neri said that drive to change the way HPE does business is already paying off for partners with "improved" sales execution as a result of a significant reduction in the number of server SKUs in both the volume and value markets.
HPE, in fact, is well on its way to making good on its plan to reduce the number of volume server SKUs from 26 to seven and the value server SKUs from 27 to nine, said Neri
What's more, he said, HPE compensation changes -- which took the number of HPE internal compensation plans from 400 to 25 -- is also driving improved sales execution. "That is one of the other reasons we are executing better," said Neri. "We have told the sellers exactly what to focus on and how they are going to get paid. That is a motivator."
Neri's comments came after HPE reported the second consecutive quarter of double-digit sales growth since he took the helm.
For the quarter, HPE reported a 10 percent increase in sales to $7.5 billion, up from the Wall Street consensus of $7.38 billion.
HPE reported non-GAAP diluted earnings for the quarter of 34 cents per share, up 3 cents from the Wall Street consensus of 31 cents per share.
As a result of the strong performance, HPE raised the guidance on its full-year non-GAAP earnings outlook to $1.40 to $1.50 per share for 2018, up from previous guidance of $1.35 to $1.45 per share.
HPE shares in after-hours trading were up 7 cents per share to $17.48.
HPE's intelligent edge sales, which includes its Aruba wireless networking business, were up 17 percent in the quarter to $710 million compared with $606 million in the year-ago quarter.
HPE's hybrid IT sales, which includes compute, storage and data center networking, were up 7 percent to $6.0 billion compared with $5.63 billion in the year-ago quarter. Storage sales, powered by the company's Nimble all-flash portfolio, were up 24 percent.
Neri told CRN that he was pleased with the strong second-quarter results. "We grew in every business segment and in every geography," said Neri. "That has not happened in a long time. That gives me a sense of confidence and pride in the hard work we are doing here."
Neri said the Next initiative is poised to deliver even greater benefits for partners' ability to "capture demand" at the right time. "This is about the partner experience, the way they configure, quote, get pricing and get the products," he said
As part of the Next intiative, HPE is set to move forward with a massive IT transformation of its own with the implementation of a new global SAP enterprise resource planning (ERP) platform. "This second half of 2018 is about laying that IT foundation," said Neri. "That is a big lift. That alone will be able to drive integrated quote-to-cash and the ability for a simplified supply chain. For partners that means predictability and consistency in execution."
The Next initiative is one more example, Neri said, of HPE's drive to treat partners as an extension of HPE itself. "I always say I treat our partners as if they are part of my direct sales force," he said. "Whatever self-enablement I give my sellers, pre-sales and solution architects, I will give them the same thing."
Partners, for their part, said they are already seeing the Next initiative pay off in increased sales velocity with more HPE reps working hand in hand with them to close deals in higher growth markets like flash and hyper-converged.
Mark Melillo, founder and CEO of Melillo Consulting, one of HPE's top Platinum partners, based in Somerset, N.J., said his HPE business is growing at a robust double-digit clip."We are at 78 percent of our [annual forecast sales projection] number through the first half," said Melillo. "I think we will finish this year at 170 percent. We're pretty excited."
Melillo said his company is profiting from the HPE innovation charge with strong sales of HPE's Synergy composable infrastructure and the HPE SimpliVity hyper-converged system.Customers are seeing the benefit of buying Synergy as both a blades replacement and an avenue to a future DevOps hybrid IT platform, said Melillo. "Everyone is realizing that Synergy is a great blade replacement," he said. "That has really opened the doors to greater sales. We love it."
Melillo is also seeing strong momentum with SimpliVity as a far-reaching hyper-converged game-changer for customers. "HPE is showing some great growth, especially for a $28 billion company," he said.