Meg Whitman uses Q1 results to argue the case against Dell/EMC

HPE posts its first financial results following the split of the business

Hewlett Packard Enterprise (HPE) reported first quarter (Q1) 2016 revenue of $12.1bn, a decline of 3% due to the effects of the strong dollar.

Following the split, the business is now focused on building an enterprise IT organisation.

In a transcript of the earning call posted on the Seeking Alpha website, CEO Meg Whitman said: “Our innovation engine is firing on all cylinders. You’re going to see some amazing introductions in the coming quarters in key areas of the portfolio, including servers, cloud, high-performance computing, IoT [internet of things], all-flash storage, Aruba and converged systems.”

When asked about the effect of Dell’s acquisition of EMC, which is due to complete in March 2016, Whitman argued that HPE was in a strong position to take advantage of the disruption in the market such an acquisition would make.

Drawing on the experience of when IBM sold its x86 server business to Lenovo, Whitman said: “We have a focused channel play called Smart Choice and we have a big opportunity to take Dell and EMC business – much as we took a lot of the Lenovo business that would have gone to Lenovo. So, we’re seeing good results in the marketplace. We’re rolling out our full sales efforts.”

She also said that, unlike Dell, HPE is focused on research and development. “We continue to invest in innovation. For perspective, the entire EMC research and development budget is $2.7bn. So we feel good about our hand. Two completely different strategies, but I like where we are.”

HPE on a path for growth

In terms of constant currency, revenue grew 4% year-over-year. This is the first time all parts of the business has seen growth since 2010, according to Whitman.

Networking revenue grew 54% year-over-year as reported – or 62% in constant currency – and expanded operating margins, driven by the acquisition in March 2015 of Aruba and strong execution across all regions.

The company’s server division grew 5%, while storage revenue was up 3% year-over-year in constant currency.

The company claimed storage was boosted by 3Par, which had triple-digit constant currency growth in all-flash, growing at three times the market rates. Converged storage grew 17% year-over-year in constant currency. This business accounted for 56% of HPE’s storage revenue.

Read more about HPE’s strategy

Technology services fell 3%, while its Helion cloud infrastructure gained 200 customer wins during the second half of 2015.

This is the first quarter of earnings since Hewlett Packard’s split. Speaking on the earnings call, chief financial officer Timothy Stonesifer said: “As part of the separation process, we developed a clear financial architecture for HPE, where each business segment has a specific role in driving overall company performance.

“Enterprise Group is our growth engine; Enterprise Services is committed to stabilising revenue and expanding margins; Software provides high margins and strong cash flow; and Financial Services provides a consistent annuity-based revenue stream.

“After only one quarter, it’s already clear that each business is executing against this framework and, as a result, is driving solid financial performance at the HPE level.”

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