M&A Key To Growth
During the question-and-answer period following the HPE presentations, an analyst noted that HPE’s investment over the past three years in research and development grew 24 percent even as revenue declined materially, meaning that mergers and acquisitions have to be a part of growth, and asked if HPE plans to increase the size or quantity of M&AE transactions and in what areas.
Neri said that HPE will have invested $4 billion in organic R&D from 2018, when he declared the edge to be the next IT frontier.
“The acquisition of Silver Peak is an incremental addition to that strategy, but again, always with discipline of return on investor capital,” he said. “Cray is another great example of doubling down after our acquisition of SGI and our organic business in HPC.”
HPE’s current planned 1 percent to 3 percent revenue growth and its expected margin expansion is pure organic at this point in time, which means that HPE does not need an incremental acquisition, but will continue to assess what is available at the right valuation to accelerate its strategy, Neri said.
“And those areas are in the software space,” he said. “Definitely in the software space. Obviously, that‘s what makes [customers’] experience unique and differentiated. And anything that is capable as a service will be also considered.”
HPE is very disciplined when it comes to the 18 acquisitions over the past five years starting with the very successful acquisition that year of Aruba, Neri said.
“But obviously, we need to continue to assess what‘s available, and always think about, can we bring the right intellectual property and the right talent that we can quickly incorporate in our solutions, and then take it to our go-to-market at scale,” he said. “So we continue to do that. And I expect that to continue to be the case.