HPE CEO Antonio Neri On Google Cloud Agreement, Broadcom VMware Deal, Dell And Cisco
Hewlett Packard Enterprise CEO Antonio Neri spoke with CRN about the company’s blockbuster HPE GreenLake distributed cloud agreement, the impact of Broadcom’s $61 billion acquisition of VMware, and how HPE’s second fiscal quarter results compare with rivals Dell Technologies and Cisco.
Another Blockbuster Quarter For HPE GreenLake
Hewlett Packard Enterprise CEO Antonio Neri said that GreenLake’s strong performance led to a whopping 107 percent increase in as-a-service orders in the most recent quarter.
“That is the third straight quarter of triple digit [as-a-service growth],” said Neri in a conference call with analysts. “We continue to see a great deal of interest in our [GreenLake] platform which is evident in our sales pipeline.”
HPE added an additional 150 new GreenLake customers in the quarter, including BMW Group, which is using the platform to “streamline and unify” its data management across its global locations, said Neri.
In addition, Worldline, the fourth-largest digital payment provider, is leveraging GreenLake to implement an upgrade to its payment platform, said Neri.
The number of partners “actively selling” GreenLake increased by more than 50 percent compared with the year ago quarter, said Neri.
In addition, the number of partners selling multiple GreenLake deals increased in the quarter by 2.5 times year over year.
With supply constraints a factor in the quarter, HPE reported non-GAAP diluted net earnings of 44 cents per share on sales of $6.71 billion for its second fiscal quarter, ended April 30. That compares with non-GAAP diluted net earnings per share of 46 cents on sales of $6.7 billion in the year-ago quarter.
HPE order growth was up 20 percent from the year-ago quarter, the fourth consecutive quarter of 20 percent or more order growth.
“We are seeing persistent demand from our customers, underscoring both their IT spending prioritization and their attraction to our compelling portfolio,” said Neri.
Ahead of the conference call, Neri spoke with CRN about the company’s new agreement with Google Cloud, Broadcom’s impending acquisition of VMware and how HPE stacks up against competitors Dell and Cisco.
How was channel performance in the quarter?
The channel performance was very strong. The channel grew faster than our direct business in many areas of the portfolio.
GreenLake now is a very sizable part of our business. It grew 107 percent this quarter, the third consecutive quarter of doubling the business.
Overall it very solid. Bookings were very high, [up 20 percent from the prior year period, the fourth consecutive quarter of 20 percent or better order growth].
The results show that customers continue to endorse our strategy to be the edge-to-cloud company.
Are more customers considering GreenLake as a result of IT inflation supply chain issues?
Absolutely. That is why I am so pleased with the results. We keep adding 100 plus [GreenLake] customers every quarter. A lot of those come from the channel.
In March we announced a series of enhancements to the platform. We brought five new partners and a large distributor to the platform. You are going to see more of that as we go forward.
The reason they are looking at GreenLake is, first of all, they need a hybrid and a multicloud experience. Secondly, with all the constraints, you can leverage GreenLake as a way forward to address your most immediate needs. As customers learn more about the GreenLake experience they get more excited about it and therefore they consume more. Those are the key elements.
One of the key customers that we will talk about today is the fact that Google Cloud is going to leverage HPE GreenLake for its managed, hosted distributed cloud.
So one of the largest cloud providers is going to leverage HPE GreenLake for their distributed cloud on-premises. That is going to be through GreenLake.
What are the details of that deal, and what impact will that have on HPE partners?
We are going to take the Google Cloud stack and our GreenLake offering and that becomes the defacto primary managed, hosted cloud when the customers want Google Cloud on-premises. That is going to be through HPE GreenLake. I’m excited about it.
What does this mean for partners who are selling GreenLake?
There are of course a lot of partners selling Google Cloud. Now they can sell Google Cloud plus the on-premises GreenLake solutions.
They no longer have to do all sorts of gymnastics to say, ‘Your stuff is in Google Cloud, now you want something on-prem, and I have to put it together for you. Now you do it together with HPE GreenLake. If you go to HPE GreenLake, you can go to Google Cloud or Google on-prem, which is basically the solution for GreenLake. That is a unification of the experience which, for the partner, is all about removing friction and making more money.
What does the Broadcom acquisition of VMware mean for HPE?
Obviously VMware has been an important partner for us for almost two decades, and they continue to be an important component of what we deliver on our servers or through GreenLake.
At the same time, it is not the only solution. Remember, GreenLake is an open, flexible solution that allows customers to choose their multicloud stack, whether it is VMware, Nutanix, Red Hat or SUSE. We offer all of that through HPE GreenLake.
The second piece of that is we as a company as part of our GreenLake road map continue to add software [intellectual property] that we own in terms of improving that [GreenLake] experience through automation, lifecycle management and hybrid cloud capabilities.
I can’t comment too much about what Broadcom is going to do with the asset because I don’t know what their plans are. It’s an announcement right now. What I’m worried is that the asset needs to continue to innovate. I’m sure the Broadcom people understand that.
How long do you expect the supply chain issues and backlog to continue?
It will continue for a while. In Q2, the impact of the China lockdown and the Russia exit had a $250 million impact on our revenue and almost six cents to our [earnings per share]. But with order growth of 20 percent four consecutive quarters in a row, the supply availability from the challenges in April in China [from the COVID-19 lockdown] contributed to the backlog.
The backlog today roughly speaking is 3X the normal seasonality and historical levels. On the other hand, our bookings are astonishing. Our compute business grew bookings 23 percent year over year.
Our compute business is by far the most profitable compute business on the planet. We delivered a 13.9 percent operating margin, which is higher than the entire Dell [Infrastructure Solutions Group] profitability of 10.2, which is inclusive of compute, storage and networking.
Our bookings at the edge were up 45 percent year over year. The channel plays a huge role because 92 percent of that business goes through the channel. To put that in perspective, that grew five times faster than Cisco.
What is the big difference between HPE and Dell in terms of profitability?
We are focused on profitable growth versus just revenue growth. And remember we have a unique set up in China where we don’t recognize the revenue. [HPE has a unique partnership in China with H3C Technologies, in which HPE owns a 49 percent stake.]
What went into the decision to shut down the Russia and Belarus business?
As you know, we suspended sales and shipments in Russia and Belarus [in February]. We decided to wait 90 days to see if there was some sort of resolution to the conflict. We totally condemned the Russia invasion. Unfortunately, there is no resolution in sight, and it is no longer tenable for us to maintain our operations there.
So we have decided to announce the exit and manage it in an orderly fashion over the next several months.
We are going to treat people with respect, as we normally do.