‘Capitalizing’ On Technology Megatrends To Drive Profitable Growth
Hewlett Packard Enterprise President and CEO Antonio Neri told Wall Street analysts that HPE is “capitalizing” on significant technology “megatrends” that will result in sustainable, profitable growth for the company and its investors.
The global pandemic has “created a new and different world” that is accelerating megatrends that HPE bet on years ago, including intelligent edge, said Neri at the company’s annual securities analyst meeting Oct. 28.
“The pandemic has accelerated several relevant megatrends,” said Neri. “First, we see the explosion of data at the edge driven by the proliferation of devices and things. As [market research firm] Gartner recently predicted, by 2025 more than 50 percent of enterprise managed data will be created and processed outside a data center or the cloud.”
Neri, in fact, in 2018 declared the edge as the “next frontier,” backed up by a $4 billion bet over four years in the edge business. “We see the benefits of this investment in double-digit growth,” he said.
In the most recent quarter, HPE’s intelligent edge sales were up 27 percent from the year-ago period to $867 million on a record number of new orders and a backlog five times greater than a year ago.
“We have all witnessed the importance of living and working at the edge firsthand, particularly over the last 18 months, whether it was watching our children engage in distance learning, having doctors provide health care through telemedicine or simply working from home,” said Neri. “Secure connectivity is essential in this new reality.”
The second big megatrend, said Neri, is the need for a “cloud experience everywhere,” which HPE has capitalized on with its HPE GreenLake edge-to-cloud pay-per-use platform that is now driving big sales gains. HPE GreenLake channel orders, in fact, were up 152 percent in the most recent quarter.
“Looking ahead, the next decade will be about managing data and workloads wherever they live across a distributed enterprise—a cloud-everywhere mandate,” he said. “In fact, 92 percent of enterprises have embraced multi-cloud strategies and they recognize the need for different cloud environments for different types of data and workloads.”
The third megatrend, said Neri, is data as the new currency that powers the digital economy. “Data is now our most valuable asset, and I predict that one day it will be recorded on balance sheets,” he said.
“Data is growing and evolving rapidly, its characteristics are shifting as it becomes more unstructured, more time-sensitive and more distributed,” said Neri. That is leading to greater momentum for HPE’s GreenLake edge-to-cloud platform, he said.
“Customers need a data-first modernization approach across edge to data center to cloud and this is why HPE declared our vision to become an edge-to-cloud company,” he said. “Our HPE GreenLake platform accelerates multi-gen IT transformation through a unified cloud service experience that enables customers to access, control and maximize the value of all their workloads and data. It is an open, secure, fully integrated platform that brings a unified experience across the edge, data center, colocation and cloud. It is automated and easy to consume with capacity available to scale up and down on demand. It offers true pay-per-use consumption so customers only pay for what they use.”
HPE is now forecasting a three-year compound annual growth rate of 35 percent to 45 percent for annualized recurring revenue (ARR)—a key measure of GreenLake adoption—up from the prior 30 percent to 40 percent forecast.
At the same time, HPE said GreenLake is driving higher margins, with the ARR percentage of software and services set to soar from 61 percent in fiscal year 2021 to 77 percent of $2.3 billion in fiscal year 2024.
For the overall business for fiscal year 2022, HPE is forecasting 3 percent to 4 percent revenue growth with an increase of non-GAAP operating profit of 10 percent to 15 percent and free cash flow of $1.8 billion to $2 billion.
Here are seven takeaways from Neri’s question-and-answer session with analysts at HPE’s securities analyst meeting.