HPE CEO Antonio Neri On HPE Juniper Networking Channel ‘Momentum,’ Magic Quadrant Recognition And ‘Sales Force Day One Integration’
“Both (HPE Aruba and Juniper Networks) are doing very, very well through the channel,” said Neri in an interview with CRN. “Both have great momentum. Obviously, partners want to sell both products. Some are selling one and some are selling the other one.”
“Both businesses are doing very, very well through the channel,” said Neri in an interview with CRN after the company posted combined HPE-Juniper networking business sales for the third fiscal quarter, which ended July 31, of $1.7 billion, up 54 percent from the prior-year period. “Both have great momentum. Obviously, partners want to sell both products. Some are selling one and some are selling the other one. Everybody wants to sell both because when you are selling both you have the ability to fulfill any demand for any vertical, any use case, or any deployment whether it is cloud-based, virtual private cloud or on-premises for sovereign deployments.”
HPE Networking campus and branch, data center networking and routing were all up double digits year over year in the quarter, said Neri. Security products were up high single digits, he said.
On a stand-alone basis, HPE Aruba intelligent edge networking products were up 11 percent year over year.
HPE managed services sales through partners, including HPE VM Essentials and Morpheus software, were up 87 percent year over year, said Neri.
Overall, HPE channel sales were up 7 percent in the quarter.
Neri urged partners to get “on board” and get the HPE Networking certification and training to sell both the Aruba and Juniper networking portfolios.
“As we go forward, obviously we are going to work with distribution to make sure that the coverage and the accessibility of the products is all there,” he said. “But for our partners it is important that through this time frame they understand that we have clear processes in place for the Partner Ready Vantage program for networking. They need to go through the on-boarding and the training and certification, which is a must-do to be able to sell the entire portfolio.”
HPE is already incentivizing the Aruba and Juniper Networks sales teams to sell both networking portfolios, said Neri.
“We are incentivizing both sides of the sales force now to drive what I call ‘sales force day one integration’ to sell both products so we can maximize the momentum we have on each side of the portfolio,” he said.
Overall, in the quarter HPE reported better-than-expected sales of $9.13 billion, up 19 percent from $7.71 billion a year ago. The Zacks consensus estimate was $8.78 billion.
The company reported non-GAAP earnings attributable to HPE of $631 million, or 44 cents per share, down from $661 million, or 50 cents per share, from the prior-year period. The results were within the HPE outlook range of 40 cents to 45 cents per share.
On the company’s quarterly earnings conference call, Neri said the HPE-Juniper integration is “progressing really well.”
Neri said in the campus and branch networking segment HPE and Juniper are going to “thoughtfully integrate” the Juniper platform and the Aruba Networking Central platform.
“We are not going to leave any customer behind,” said Neri. “We are going to sell both products, and you are going to see an integration that happens over time through the AIOps layer. That’s the opportunity we have here. The good news is customers want both today, and we can serve every market vertical, and we can also deploy any type of solution whether it is cloud-based, virtual private cloud, sovereign or on-prem.”
HPE is also working on integrating its HPE Private Cloud portfolio with the software-defined networking component from Juniper, said Neri. Finally, HPE is also driving integration with its storage and server business with networking switches.
Here is an edited transcript of the conversation with Neri.
What were the highlights from the third fiscal quarter results for the new combined HPE-Juniper?
First of all, I am incredibly pleased that we closed the Juniper transaction, and you see that already in our numbers with just one month of results.
The reality is that we posted record-breaking revenue for the company with expanded profitability in Q3. That’s true with or without the Juniper numbers. So on a stand-alone basis, that statement stands. We posted record-breaking revenue and expanded profit and margin in most of our businesses. Then when you add Juniper, it makes the case even stronger.
Our revenue was $9.1 billion, up 18 percent year over year. Profit was $777 million. That improved sequentially both in dollars and percentages. We posted 44 cents of EPS [earnings per share] at the very high end of our range, which was close to 45 cents.
How did the key segments of the business perform?
Each of the large three key segments grew revenues and profit dollars and operating margins.
But when you start with networking, including Juniper, our revenue was up 54 percent year over year. Operating profit was up 43 percent. Campus and branch, data center networking and routing were up double digits year over year.
Security was up high single digits.
What do HPE partners need to do to get out of the gate quickly to sell the Juniper data center networking portfolio?
They need to get on board. There is a process with a series of steps, including the certification you need to go through. That will open up the opportunity to sell both our [Aruba and Juniper] products.
As we go forward, obviously we are going to work with distribution to make sure that the coverage and the accessibility of the products is all there.
But for our partners it is important that through this time frame they understand that we have clear processes in place for the Partner Ready Vantage program for networking. They need to go through the on-boarding and the training and certification, which is a must-do to be able to sell the entire portfolio.
Another important point is that this combination is already being noticed by the market. If you go back to May, there was a [Gartner] Magic Quadrant posted where both Juniper and Aruba were again recognized as market leaders, but our closest competitor was not a Magic Quadrant leader. That is because clearly we have truly differentiated offerings.
How did the server business do?
I would say we had a very solid performance. We posted all-time-high revenue of $4.9 billion, which is up 16 percent year over year and 21 percent quarter over quarter. We expanded operating profit dollars and we expanded operating profit percentages, which was our plan.
Most importantly, our traditional server operating profit is back to historical levels, meaning we addressed the Q1 challenge of pricing and discounting.
AI revenue was $1.6 billion, which is a significant increase quarter over quarter. We booked $2.1 billion in net-new orders. More than 50 percent of those orders are in enterprise, which is now up for the seventh consecutive quarter. Sovereign [AI sales] was up more than 250 percent year over year with marquee deals in UAE [United Arab Emirates] and Saudi Arabia. One of them is with a great partner of ours. We cannot talk about that deal yet.
Very importantly, we also lowered our inventory for the entire company to now $7.2 billion. That is a significant inventory takedown on a quarter-over-quarter basis.
We delivered a large [Nvidia] GB200 deployment, one of the largest in the world, in Q3.
How did the hybrid cloud business perform?
In hybrid cloud we grew revenues 11 percent year over year for the fourth consecutive quarter. We expanded profitability by 26 percent on a dollar basis, and we expanded operating margins, both on a quarterly and year-over-year basis. In storage, HPE Alletra MP storage was up triple digits year over year.
Our ARR [annualized revenue run rate] on an organic basis was up 40 percent. With one month of Juniper [results], it was up 75 percent year over year. The mix of software and services now represents more than 75 percent.
Our CloudOps Software Suite—VM Essentials, Morpheus, Zerto and OpsRamp—was up double digits year over year.
The number of new Private Cloud AI logos doubled on a quarterly basis.
We launched a bunch of new products [in the quarter], including the Juniper Mist agentic AI. In the server business we launched the RTX 6000 Pro for enterprise and the Blackwell Ultra accelerated GPUs. We also introduced the next generation of HPE Non-Stop. We doubled the memory and the interconnect bandwidth. We also introduced GreenLake Intelligence.
How did the channel perform for HPE in the quarter?
Our indirect business grew 7 percent year over year. HPE Private Cloud was up 44 percent year over year and 31 percent in revenue.
Our managed services through the partners was up 87 percent year over year. That is the adoption of Morpheus and VM Essentials.
Our server [business] grew 8 percent year over year. That is mostly because of enterprise growth where partners play for the most part.
Our intelligent edge [Aruba networking] business grew 11 percent year over year on a stand-alone HPE basis.
Overall, it was a very strong performance. We are very pleased.
The integration of Juniper is going well. So now the partners have the ability to sell an amazing integrated portfolio, which will drive profitable growth for them as we go forward.
We are going to talk more about the networking strategy when we get to the analyst meeting [on Oct. 15] in New York.
What kind of reaction are you seeing from HPE customers and partners for the HPE Networking AI story including Juniper Mist?
First of all, it’s not just Mist. It is also Aruba. Both businesses are doing very, very well through the channel. Both have great momentum. Obviously, partners want to sell both products. Some are selling one and some are selling the other one. Everybody wants to sell both because when you are selling both you have the ability to fulfill any demand for any vertical, any use case, or any deployment whether it is cloud-based, virtual private cloud or on-premises for sovereign deployments.
The reaction is incredibly positive [from partners]. They want to know how we are going to drive integration of campus and branch. We will talk more about that at the Securities Analyst Meeting and at HPE Discover Barcelona, where will talk more about the product road map from an AIOps layer perspective.
The Juniper business and the switching portfolio is doing extremely well. They had record-breaking performance in their own quarter. Cloud demand for the products—both for switching and routing—is up. There are multiple vehicles to drive growth.
Remember, in some of these geographies where our channel presence is super strong, like in Europe and Asia, the access to this [Juniper] technology will allow partners there to be even more relevant.
How is the AI business doing?
AI continues to be solid. We participate in three segments. In the service provider segment, we are going to lead with networking for AI.
We are going to sell our servers [there] where it is accretive.
In the sovereign [AI] space, we saw tremendous momentum. We sell the full rack scale architecture based on the partnership with Nvidia and others that sell accelerators, including AMD.
In enterprise, we have grown seven consecutive quarters. In this quarter we doubled the number of logos. There we lead with an integrated stack, which is Private Cloud AI.
So we have the ability to fulfill [customer] demands and needs in different ways and also the ability to leverage [AI] across the entire HPE portfolio by integrating networking in every aspect of the portfolio.
So is HPE already out of the gate leveraging its crown jewel Global Partner Network to sell more Juniper networking?
It’s going on now. We want to be more crisper on incentives as we unveil the [next] generation of the [partner] programs with the rest of the sales force team.
We are incentivizing both sides of the sales force now to drive what I call ‘sales force day one integration’ to sell both products so we can maximize the momentum we have on each side of the portfolio.
So the bottom line is HPE is making a big investment in sales incentives for HPE Juniper?
We’re making investments in innovation and our ability to go sell that innovation in a very cost-effective way, and the partners now have the entire suite of products from networking to server to storage to cloud with HPE with an integrated experience, which obviously is GreenLake. That experience will continue to define how we sell in the market together with our partners.