HPE - Earnings call transcript Q4 2017 | Hewlett Packard Enterprise Company

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Operator

Good afternoon and welcome to the Fourth Quarter 2017 Hewlett Packard Enterprise Earnings Conference Call. My name is Austin and I will be your conference moderator for today’s call. At this time, all participants will be in listen-only mode.

We will be facilitating a question-and-answer session towards the end of the conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. to call, presentation Mr. like host to now today’s for would turn over the your I Andrew Head Simanek, of Investor Relations. Please proceed.

Andrew Simanek

am Enterprise. Stonesifer, Vice Financial like Whitman, HPE’s Good for HPE’s quarter earnings our Executive I Andrew Executive with of fourth Head Officer. afternoon. Meg call Investor fiscal Hewlett XXXX Packard Chief welcome Officer And President to would Chief and conference I you to Simanek, Relations and Tim

this let handing made being today’s call release Relations call accompanying call earnings presentation that at to year. remind Before press the available be posted the X We Investor the is webpage investors.hpe.com. Meg, A will me release of the after replay for on webcast. approximately slide HPE and the you over webcast shortly our

of forward-looking as our and based always, and the view this businesses best As are today. are of them presentation our on world we see elements

disclaimers risks, please more assumptions. materials involve that the detailed relating information, statements on For uncertainties the forward-looking earnings see and to

For its any assumptions, including please intend and update a HPE’s not risks, statements. uncertainties forward-looking XX-K. SEC, to the of and some does filings with recent assumes discussion no refer Form to HPE obligation of such most these of

annual XXXX. reflects October the on discussed ended financial HPE’s We this also note Form that on year on estimates this XX-Q fiscal XX, information and differ report information ultimately materially on amounts reported call could based for time at available from the

on basis over believe noted operational revenue that, earnings Finally, for expressed Please year presentation on unless of divestitures it with comparable GAAP today’s exclude Throughout this information XXXX call to this accompanying slide me beginning rates otherwise, website. we are year-over-year HPE’s for a a the growth to financial release provide the We let to better to that website details. and reconciliations on refer performance. With have information the has been Meg. adjusted fiscal all and provided representation basis, of on approach tables currency. are a our presented non-GAAP turn and helps impact conference our

Meg Whitman

everyone and Thanks, to on thanks the Andy, today. joining for call us

all transition The career recall This that is during culture. will have faced of his at we we Neri, will as HP. a the Antonio have and we I EMEA service that will how HPE’s down end CEO I HPE the Board unanimously technology CEO work is and will CEO XXXX. challenges President and Many customer President by As have remain our the just seen, QX. will of background be join training, February I the and and the on became the come. customers, the you have announced my HP a the X, about when Antonio you XX-year stepping partners, recognize done He engineer transform company mind. is HPE’s said Neri years many possible years X center. on began HPE employees the veteran that HP call Director of a of a all to because should leader leader be for far has within the of our Antonio Board. type past is company of company in in had deep passionate engineer Antonio exactly I computer should come I as who next of is agreed successor. and become a Board from

culture. rebuilding reinvigorated hard today. focused number our customer couple resources channel. company critical towards NPS scores to and partners, back And We years, the first improved ecosystem productivity satisfaction across driving We we the in XX of we from and partner this leading for industry services negative entire an shifting go-to-market and to some strengthening the pivoted strengthened of cases our on improved significantly leadership team, metrics. During stabilized the a

proud also in off new our $X reignited the balance HPE exiting existed paying I net Most importantly, when I rebuilt am company of net solutions. joined today cash. groundbreaking and debt we company. innovation nearly that year delivered technology nearly We billion with billion $XX that the operating sheet is the

then also looked solutions invested research the made creating performance. number decisions certain further available to portfolio and focused Data a this and stronger For core. position, in begun into We from the project, memory introduced example, today. the project the a prototype putting of at first and our era technologies incorporating year we is computing new machine strategic have architecture entirely which the From much accelerate an for our sharpen earlier focus on Big we at

with critical was company largest exactly step there, pure-play world’s CSC and for IT and services This companies separation company. it because two Fortune Inc. in independent to first was HPE the core the by into optimize HP strength the the services From both companies, separated enterprise business we The decision, merging invest creating off allowed our strategies. and further right XXX spinning

world. $XX off Next with application for and our HPE company creating and merged value pure-play billion Micro the and in in we spun ES software software Focus The the largest delivered transactions software seventh our business shareholders. more than

We provider approach also our and unique smaller the in infrastructure. a to Group, market Holdings us of put strong HXC in business IT position divestitures, second largest capitalize Chinese has creating technology made leading This world. Tipping a Mphasis of we on including the China and the divested New to of number Point Tsinghua XX%

strategic in a number portfolio strengthen areas. of to We also made our growth key additions

enhanced cloud expertise offering. our to and from and we our in services wireless accelerate Cruiser offering our example, we SGI bringing strengthened to storage we and and partners the analytics. models machine to Aruba, our acquired our also Storage cloud network offering compute leader Niara has IT flexible the We in and of analytics data to our network consulting our have the which security edge high-performance complete for acquired Cloud flash. then, Rasa strategy. big to learning extend management to high-end our We IT, become to all with enhance our Aruba capabilities. and consumption entry-level hybrid Networks For to performance transition acquired intelligent networking, And Since Nimble heart bolster strengthen SimpliVity business, like technology hyper-converged capacity

All companies all acquisitions to highly are These accelerating in markets of by these are go-to-market we growth are and business. channels. our core complementary our performance leveraging their

services. We invest exciting organically to continue also and and new products introduce

Converged launched more For example, launched to the compute, on we In flexible level have innovation, bring we launched have And made. for issue, industry’s we IT the Apollo, becoming X,XXX Synergy, which most explosion flexible pay-per-use board to service security called supercomputing we industry introduce we enterprise. the we secure customers highly standard differentiated a to launched address offerings industrial Systems. customers. server. in which platform. and is The now provides the the our high-performance capabilities capacity, industry’s continue With composable offering new To first we the progress like than Edgeline beyond our helping product IoT, recognizes

HPE Magic For the its Gartner of is time, all core categories. leader in first business Quadrant a

will value of dividends returned to since XX%, know strong are into a have a have focus shareholders has a return more XXXX. the S&P you when joined, have and HP I along shareholders shareholder on worked X, XXXX, Antonio whole, delivering very our starting moves the the the payoff through since delivered divestitures. for repurchases next off of total value reposition and way $XX proud top in shareholder billion have full HPE on line X% improving the times for HPE we value and these where to its then a of adjusted to we shareholder XXX. currency By As FY the is than ready capping paid fixing, X% way. and grew competitive of forward. And HPE going our results. have ‘XX revenue nearly drive we and In I year-over-year the and that the same of ‘XX company am which the share November we grew birth FY created phase year three see position I QX

paying like QX growth the growing and and X% continues QX market performance X% are Services year-over-year and and edge, in in which We stabilized tower business, server our in year. core areas respectively. grew investments the have rack all-flash Aruba and for key intelligent our and clearly QX XX% X% the accelerate outpace high-performance QX and storage in XX% to compute off. grew

resources to levels we From portfolio cost market compute is to row to continue the the track high-performance in getting best with continued EG the position. market to our our historic leadership second perspective, XX% the QX, despite improved year. as right towards for profitability margins and margins are In industry takeout in plans Our shifted we our up a and we pricing. XX% extend commodity executed challenges quarter a the in deals for was in sequentially XX.X% and QX segmentation. and align on back HPC win

redesign are confident our turn, full We we At the way years and our built for driving to HPE program and company the we FY into moved the to XX% HPE today’s ‘XX. Next itself the ability every is to be work, differentiate simplifying tomorrow’s In phase achieve purpose in solutions investing execution year about HPE target will innovations preparing future. execution of that our QX, XX% in the our in for all is of ahead. competitive Next, to environment. in

sales to minimize force. the business am disruption very we Next, no pleased particularly HPE sure While saw I QX. executing disruption and our we that to in made

is leadership tremendous the shareholders of In vision this we around strong our entire drive and team being fact, customers, have value has HPE to Next by in driven the and place. company ultimately all partners galvanized for

this Pinczuk, what leadership Irv have new forward has Chief to financial it tremendous Antonio, to running Davis, running excellent do already running to Ana our last Rothman and Sales focused. Aruba, job has deep the IT, and role, bench Analyst refined addition services. strategy go Day hybrid In clear continues which Pointnext Melkote, Andreoli, Alain running our month Phil our laser Together, and Officer clear brought Services with we was owned team new crystal an I hope Keerti at and is energy a

applications we that a be out have InfoSight, to rolled which cloud becoming storage vision and their our of entire our game problems IT simple. InfoSight, an with and portfolio. they differentiated and help for to that across hybrid the New next all leading autonomous seamlessly And our exactly environments software-defined hybrid is advanced IT their manageability HPE vision the software-defined across the there. Simplicity center make that is from highly that we we that autonomous our will the the Stack. level technology changer technologies HPE with is that integrate what end do private brings ultimately that means deliver. to and invisible a industry public analytics for week multiple is data InfoSight before This Hybrid predict this to the core doesn’t to core But Project end came data the to traditional IT and prevent will AI Nimble that customers predictive and optimize Madrid, world center. announced HPE intelligence with machine business. IT morning, next through clouds. the intelligent acquisition, plan ability just happen. learning, predictive is officially give the and offerings XPAR edge. at customers platform and step our introduce To we in infrastructure is new data transparency Leveraging IT We going for we First, secure Discover

and what our what lets cloud asking accelerate the control. been platform with is and and have about created. customers operate customers we want public simple and all and a development one deployment experience This the is It’s and cloud simplicity optimize will for have a integrated our else can match deploy, DevOps management in that app environments unified hybrid most, and it private market on-prem no through platform Stack capabilities. you IT New

Second, edge. the power we intelligent

we data with retail across and We environments connectivity a our needs line, helping Converged has This notice. is or bottom that and and Aruba Earlier customers, whether edge this data ever have new leader in and that our was for IoT this that this from our is been new a IoT ahead at directly areas allow their wireless floor of platform provision. position. integrates the seamlessly Quadrant are their employees is to from fall, be for source and drive where are offerings differentiated the it customers Magic customers and market their disparate in the scale. that systems revenue from industry Aruba store, compute factory universal to streams software for to massive time that named displaced Gartner’s analyzed the These well wired offerings Cisco bring business connect first to first wireless placed experiences drive the area securely wired networking highly taking that and all of are storage Systems Edgeline from revolution the the

is services advisory, are we than More do critical our services. professional and driven more operational across Third, by more everything services ever. expertise and

for We are as also services models. pay-per-use us in look through to financial growing interest seeing our consumption customers flexibility

at next and Our Look customers Flexible area, technology is on metered than never our Discover make solutions, offering Capacity offer this because news different and based more else market. overpay combining financing, out elastic for model we operating anything hardware, led in don’t area Through and in week. services usage, IT simple software the use. pay-per-use they we on this on

been lead proud and Packard. a it company I have we of what by of Founded the past me has privilege X years. the the Bill in Let Hewlett closing to accomplished during am say lifetime that Dave

We over a of is a success. details have to tremendous take reins. and experiencing board am call leaders the I a the now, And I that to for to results. very laid the prosperous confident foundation out as financial hand future progress provide time strong enjoy will will will HPE’s look Antonio new a forward generation Antonio on Tim now and and I for who right member the

Tim Stonesifer

Thanks, Meg.

miss to with day-to-day the into interaction, a your forward. with board over X tireless of past thank look our just jump as HP personal you and years. I the closely I’ll going forward member working I mentorship Before but to leadership for to want partnering and you results, me Antonio

have that will longstanding this In as we fact, CFO a I the joined Antonio’s so HP make relationship seamless. of transition business,

So, earnings. operating solid we QX, better-than-expected turning to margin improvement sequential revenue and our growth, performance, saw in

Revenue offset neutral spend competitive commodities in in environment, the Americas segment the to right was year that up value. to is revenue software, continue and Our moves $X.X results I by into in Total continue The remain in confidence are performance pricing X and by in from Revenue operations. quarter, storage continuing see me and leading single-digit our growth steady macro will million also as deliver improving a core exchange the $X.X By From region, which we $XXX commitments of for Tier and gives performance month accounted sales, headwinds. the quarter shareholder France or impact driven server was was compute a grow stabilized mid and the fiscal billion. includes This softer long-term a QX. broadly Iberia. ‘XX perspective, networking making networking we improved IT drive excluding the X discontinued year-over-year Europe and with Germany, minute. but growth remain when in was X% over HPE’s business somewhat dive in in accelerated rate for results. organic to billion, XX%. up operations a quarter to

in core Asia-Pacific India delivered China. server Japan, strong sales, and with Australia, growth

basis but basis down year-over-year, basis XXX XX.X% but was XX margins, profit to gross points was down XXX of the X.X% points operating up Non-GAAP XXX points margin up sequentially. sequentially. points basis of year-over-year, Turning

earnings challenging outlook tax elevated income more XX% our pricing to $X.XX rate commoditized prior savings, In addition of a servers. from net Non-GAAP commodity separation by earnings and value a of was segments we of transactions of from expense. million favorable primarily million, takeout other Non-GAAP and the as to above from focus market share another per benefit to a due to net shift assets continue environment X% help of benefit of $X.XX share away non-cash primarily diluted million, Hurricane and as to primarily towards continued mix is increasing continued reform. connection earnings of net our custom for outlook cost lower provided in normal tax diluted actions related intangible amount of to of growth Harvey $X.XX a $X.XX adjustments $XX $XX tax tax diluted restructuring the result the $X.XX per transformation million, and software of $XXX our we charges our DRAM charges saw benefits GAAP per share undertook the excludes range and in spin-merge pre-tax $XXX of seasonality, the we cost above income amortization offset due with income $XXX better offset anticipation million. of of separation-related and to and $X.XX and quarter. over costs previously These costs, with previous potential

year-over-year turning X% business, server revenue in X Tier group, the the Now, to X% up sales. enterprise up results and excluding was by

the and Point momentum growth core areas stabilized Next. business all-flash campus servers strong basis year-over-year. storage and key switching, we points down like RAC As Operating were margins in Aruba XXX tower wireless, saw and

sequentially XXX X% but we market. points we executed custom to However, X% X well mix was are server improvement driving growth is Point X XX.X%. down sales the server business from Next margin our to our executed the higher commoditized basis as primarily they attached X% We cost grew through in and the Tier AUPs. RAC revenue. core revenue The year-over-year, improved and sequential excluding configurations as Tier benefits plans richer exit of higher result server plans tower lower Server executing and savings

year-over-year was are core the forward, low and custom driven to a RAC X,XXX has growing moving for up And revenue exiting grew as by X% discussed further and ramp also Nimble changing the commoditized value XX%, work carries attached, Nimble, volume acquisition. our segment XX% challenges customers. over portfolio was America. Looking grew continues arrays XX% at competitive This up with and In compute margins better in expand over will and and our outpace and in tough us easier growth higher high-performance services sequentially which to mid-range almost expectations. will now help tower. continues XX% make profitability. some organically. the approach no-touch us and with our to Synergy to and Storage XPAR we to Analyst servers due X% performance our or Meeting, with a server go-to-market by All-flash which soft to SGI over environment model

field. bringing these for storage XPAR a and together We Nimble sales at under head-on by and hiring Keegan challenges Nimble addressing leader, sales the more aggressively are new are the Riley, who led team specialists

InfoSight, As Meg out portfolio. also entire mentioned, across rolling we XPAR are our technology predictive Nimble’s AI

these Networking continues turn revenue are We to quickly well, driven Aruba things that very switching, which by campus perform XX% XX% will solutions was around. actions XX%. and wireless with grew over up confident up which

of Aruba We pull-through reinforcing encouraged thesis branded very and Aruba by the be continue both the strength Aruba new led portfolio. wired of to strong the switching, switching investment the

X% We Next excellent new total, aggregation geographies. for switch. networking and getting are Aruba groups attach from grew center in return Point feedback grew care. growth services, non-attach also with by our support. up data Orders double-digit orders all X% capacity and led flex Within in year-over-year. up year-over-year across support, sixth to quarter, growth consecutive and the Technology core including X% revenue product In better both growth grew than

lease lease by We which offset intensity, services continued increase Services also conversion. XX% grew one-time and buyout driven unit Financial hardware sales. to a HPE revenue our large continue lower

XX.X%, XXX equity offset growth points operating revenue items, in quarter our basis and X.X% volume sequentially. was QX basis year-over-year X%, in on Return business up reflecting to these one-time direct X% growth. declined business. sixth was Excluding Operating by as increased declines lease profit solid of points down indirect for year-over-year mix. was XXX the increased the items consecutive our Financing

we am progress made our and performance, wins. the So customer looking have but back only many at by I also improving with financial encouraged the quarter, not pleased

Research the propulsion. HPC to involving now instance, Center physics is test of the clusters and NASA using problems For Langley help solve our advanced

data they provider HPC relationship and Point population. Walt largest the in global CenturyLink, helping XPAR with of a and IT India, will program recent our oldest won a University’s going with its Aruba State and a data College of shows just with transformation. help I new forward. demonstrate digital digital in expect add biggest India we for to for the of care many with are growing solid the Agriculture we These farming as food are significant support the to center seeing bank the deliver are a momentum Company a quarter, opportunity the grow We NASA the wins had U.S. production and Bank we we few to capability Next revolutionize their deal second some partnership ahead. refresh. of but with the communication Disney that Purdue develop center announced agricultural and think

flow, in in driven payments cash cycle to quarter, to expected flow primarily better from cash cash conversion working shareholders turning negative benefiting including payment to X terms. million $XXX Now, XX free improvement of dividend days during We The continued increased $XXX than was repurchases. $XXX and returned share million capital. days million by the million at improved sequentially $XXX

slightly approximately of below of of this $X We full beginning to payment million of payment we with shareholders company with to anticipate $X year. cash the We year, the operating the billion of returned balance balance with our of QX line associated $XXX the in billion in a timing range guided spin-merge the sheet year billion to billion at laid the true-ups. out For ‘XX. ended we net $X.X $X.X commitment the due our receiving

recently presentation discussion Turning to Day and our of Security I review year more ‘XX you our that detailed at for encourage fiscal gave guidance a outlook, detailed my outlook. Analyst we to

I few However, reiterating points. it’s think a worth

We of continue share year $X.XX. $X.XX diluted ‘XX net to non-GAAP fiscal to expect earnings per

shareholders in $X.X We we of XX% to cents by to just buybacks expect each reported share normalized of cash billion dividends, capital share million $XXX billion $X of form $X.X free flow cash as the $X of a per and $X.X remain free quarter. cents we flow and $X billion returning from billion increased and to committed of which

$X repurchase board Our billion. also share by recently our authorization increased

half. be this. fiscal reasons at for the we second are our As discussed will towards There ‘XX year EPS loaded Day, few backend Analyst

throughout see And a the become the the the contributions the from percentage we HPE our First, benefit accretive will progresses. greater year. value year our ramp implication earnings as products more acquisitions recent the year. will higher benefits Also share next the services as our also savings, mix throughout become compound from from a business. get of should margin cost buybacks, business and natural benefits We’ll

As a net $X.XX. and we non-GAAP to to result earnings share a $X.XX expect net ‘XX to expect per QX earnings diluted share GAAP diluted we $X.XX be $X.XX per

over Aruba to quarter. lastly manage includes we before next we’ll services, first to branch switching, and new of turn includes Now, cut center end fiscal networking touch market and report I wireless data point the briefly accurately Q&A, I in it internally business for provide year compute go our how which storage, three our towards we’ve in want segments: which to tables Beginning how and reflects on edge hybrid our ‘XX campus reporting year LAN, This next. we’ll business edge, year. restatement financial servers, of the structure and to fiscal Intelligent more begun services. and IT, ‘XX

overall Meg, we fiscal pleased year The well-positioned I’m like, is So are paying been work the doing past year. have with of this off and ‘XX. performance we the very for couple years over

it for let’s open Now, up questions.

Operator

ahead. first Scribner Please is And Bank. from with question [Operator Instructions] our go Deutsche Sherri

Sherri Scribner

some bit little I and the thought dig bit Was to wanted I little the I issues would’ve it to you guess at a Hi, Nimble little thank the business at you. have XPAR related sounds just bit doing like grown look the of because different more array if that primarily sequentially. all-flash into decelerated segments might that well? storage storage and are the it business a a

Meg Whitman

the revenue as Meg, Nimble the over Nimble with up – XX% Yes, X% was was grew flash you said it’s XX%. and all arrays storage driven so acquisition by the up

the I Tim sales So in tough but XPAR soft a in competitive in was as very good to performance mid-range and due environment States. challenges think some the United a performance the then mentioned overall, –

So action. we are taking

is sales field. sales going us mass give And the XPAR to at some that’s Nimble critical combining aggressively We add led to specialists who which Riley, storage to also and are more by Nimble. are be and going the led we going to there more Keegan teams

hit I it. and head U.S. in you So fixing think are on little we a it the right weakness the

Tim Stonesifer

we will think as I also roll InfoSight across XPAR that help the portfolio.

Sherri Scribner

And Okay, that also business. in strategy the on of Thanks. expect business to the shift and know the we Was the server decline should have less on of then that strategy service I server margin business just because lower you related business? great. the part focus shift in a move ‘XX to but as that decline we decelerated, into

Meg Whitman

our market higher much not amount offerings. it, but exactly business in associated had had you some that, quarter Tier think revenue, I large traction right. and of profit No, a Remember, outside have Yes. of got with that good Servers we this execution, a strong value was improvement X% X provider and but another it outside quite had X. grew Tier fair I service think that

as But to tower in like you to we growth continues Tier offerings value some X So declines and pivoting HPC, the addition business stabilizing that and bleed off. year are business Synergy, next etcetera. core hard to in rack our see server will SimpliVity,

Sherri Scribner

you. Thank

Andrew Simanek

the Can Sherri. please? you, we Thank Great. have next question

Operator

with Katy Our Huberty go comes Morgan next question Stanley. from Please ahead.

Katy Huberty

to And in wanted follow-up product server can about back think calendar do X the you the you thank of impacting [Indiscernible] a base annualizing reported Yes, hits the basis you. Curious is get just Tier growth? think I comments. the category that or is then whether on business XXXX? when think catalyst cycle business, that a yet to on server when you Intel

Meg Whitman

the So, I will other why question. don’t you take server ex-Tier growth take and X

Tim Stonesifer

the in an far as runs say off probably as Yes, I to that. that the about X timeframe. amount late Tier component, Sorry XXXX-XXXX would probably immaterial

Meg Whitman

concern is not are industry listen, server, start. ramp, advancement quite thus slower new to the then in that, be and their a that GenXX the we Intel on not that is There off might there And there is far Skylake, our functionality chip some is because that. called seeing in features which the Great. good but a is tick-tock that normally

What world. Security real built of making GenXX. the this which as about based will in everyone. on a real one root in anything continues GenXX will we we I be is GenXX into optimistic secure a cautiously are an about what issue enormous say most is trust is Skylake, have the difference and about security difference, of we a in have produced point because else I So, – say to like for server silicon. has this the No is

tuned on Skylake. stay let’s So

how we We that but see it any are out. seeing tick-tock, will have to not diminution of plays

Katy Huberty

Thank you.

Andrew Simanek

next Thank you, the Katy. to please? go question Can we

Operator

Toni go question comes ahead. with Bernstein. Our from Sacconaghi next Please

Toni Sacconaghi

you. in Yes, one One over Meg in hand say Tim for Antonio, I work little I I to of Meg then plans have X I a like not announcement leave. to there the anywhere Meg. to or am the to maybe thank reins your surprised you timing is said and no going things of still terms and to and last the more months am got just have for think do I

in in And to and business that year-over-year. if there were was can so XXX there points little is color add would still heart, almost a feels of I of in certainly ways of of you a go wondering am long abrupt. basis I some the comments terms server this improvement in light margins a down terms maybe change say those

So, there is of a lot still work.

obvious change. is at not so point ready it’s some HP that outsider for entirely a And to an

add could maybe color? you So, some

Meg Whitman

Yes.

think smaller, time a much the I take What the nimbler, is leaders a new a and right go have take there true of more and in would absolutely reins for Antonio reins. Tony, to to we think sentiment. focused you much And And company. it think say it, is the if is much Antonio generation I about absolutely So, I the distance. is ready been change hasn’t

a very We leadership bench. have good got

of that a And has almost and and ignition in strategy years. exactly technologist. XX company We of restructuring, got value clear needs shareholder be And worked this of in to is company. a is. of the engine, financial value have been Antonio has engineer but here the with innovation terms the business and is what added a crystal company is this next of He CEO He trained creation, lot a technologist have deeper a think focused. nice that’s every computer deep I Antonio I

think value to just So, lead the also I thing. think the right going phase of I next And is creation. it’s Antonio

created have lot here. shareholder a of We value

the simplification and lead two shareholder next he I separation, before the business announcement of our the from the the between HPE times creation. think of of turnaround alone XX% to the HPE the XXXX, strategy that XXX% value shareholder us, in put increase is since that of and three the and fall execution XXX value S&P and I just of over together going Antonio generation Next the of is right which

Toni Sacconaghi

confident the And separately, wondering, on less you then X% of the secondly and margin enterprise am b) competitive And sequential on another if margin just competition? comment pricing and you comment a) and, doing. prices at more you back, this make doesn’t DRAM quarter. I improved improvement can commented because the up are wondering that some can to of DRAM targets you am cost-cutting ability especially group, that in gave about or XX% looking your whether in terms environment on had all being has whether why frankly, you was of I hit you if Quite for giving all? I

Tim Stonesifer

look I would the expansion margin points. XX.X up basis say XXX the if QX at was Yes, you

to that in XX% us $XXX DRAM to of million to driven is we margins by talked million X% we actions improve the So, primarily were cost What ‘XX. despite $XXX QX. up QX in to gives confidence about continue another

into As about right. SAM. we at tailwinds, XXXX, it forward We we look lot talked of have a still

if thirds in that at we is roughly I savings of the of million back track are of now. the do that say two will $XXX net you that to HPE half on is Next So year. that look

accretive as splits going size So will as very continue you of there what’s the go through good those to we would and into that feel recent we think we about quarterly become take on but account, cost margins done I XXXX. more, more acquisitions the we’ve envelopes right that about

still things about So see feel will improve and or we we think we have a everything you what we margins based continue today, feel on of XX%. lot XX% that to good

Meg Whitman

me a value to absolutely by potential month-to-month the focus Toni we because it realize that, and I’d of growth it growth line it shifts the force, this to segment other will actually maybe mitigated, would anticipate quarter-to-quarter. portfolio. as marketing that by varies that the is of we on realign happen and the of we the shift would I portfolio we varies value environment be is couple a that increases critical gauge it our and to thing pivot mix country, of – as margin. but The to just in of And add operating segments hard competitive because, is say strategy the and the percent product for pricing from slightly the sales

supply would pricing been appears now margin is And would while delivery So not mitigation DRAM and we’re overall, it it I be leveling we’ll now of some say of happens. counting on and in I is that that the operating there’s talk not appears there our to for you universal match in I to from the supply is pricing in environment out demand more vendors then to key XXXX. so what say see and be industry, people that to going memory think the beginning

XX%, our drop counting way are on our results margin. we to about DRAM operating the the hit lot pretty good also to got a DRAM and going of XX% on I we We to and pricing, to in way on $X.XX feel by another increase we’re deliver that not counting XX% but XX% we are a the pricing, are in not where $X.XX confidence

Toni Sacconaghi

Meg. you, Thank

Andrew Simanek

question Thank you, next have please? Can we Toni. the

Operator

Cross Shannon ahead. Research. Our comes with Please next from go Cross question

Shannon Cross

how but came dig and issues I them, sort then they into you’re Thank forefront mitigate wanted sales to of what much. and the think to you bit just a very doing the to to obviously on side the want about doing softness sure more as shift? sales structure level that talked revenue that in you see you are during Thank your don’t collapse around the what really you Analyst and revamp make to that go you about through Day, and also you.

Meg Whitman

question. good Yes,

sales So Next the the QX,we as of areas other disruption of the phase Next HPE with HPE well. aggressively to design team, on we very during from and focused but moved phase particularly minimizing are execution

the of that us divestiture time, enabled on practices to separation leveraging so office management on was best the or lot separations And our deliver the a budget management recent approach approach. we’re it

so lot changes in begun QX in the as a sales done changes, lot implementing we’ve changes, already we And started of X, of QX, but November a we we region sales I in field put refocused specialists in mean made are well. did actually from those we structure, we in overhead more sales we and saw those the that We our QX. dismantled with to the force, impact actually no frontline changes

couple And and confidence. us with a they cylinders X, all gives that started on firing organization months the belt. their under November went with all new So of

in here. field our that. So more good under going largely think pretty feel we and about Riley, around the U.S. really the was the in Nimble Outside storage help and we not here is sales I storage in frankly enough need scale challenge and specialists Keegan XPAR combining to

Tim Stonesifer

plans. radically simplify sales front in our comp is Outside U.S. the

will focused. plans of simplified So so comp very XX that. We plans as helpful from or will folks well. think We we went so so, that say core or to be XXXs type down be

Meg Whitman

but not to we much, dramatic lastly it million Harvey I from $XX include in it didn’t disrupted Tim chain of and fashion. supply Hurricane And that would reasonably a was recover Hurricane talk about does Harvey Shannon, mentioned, Rico. our Puerto say cost

we then lot and our products divert of back airfreight so to had Houston into United States. manufacturing the to those a Europe And

in have to world. Wisconsin are any no the around Falls, then that we to U.S. required going in and Chippewa done be are manufacturing our So, redistributing announced we be longer we manufacturing Houston, will locations manufacturing

is we a in part good with turn of into a dime. couldn’t another just the simply The was QX. that chain news backlog, because supply nice weakness go So, we the weakness, QX some on

we have a really backlog got So, going into nice QX.

Shannon Cross

And a but you Thank you margins maybe little get curious think you. levels I Tim, of more all the of bit Okay, You should given cost-cutting thank about ramp back-end said about really have kind can done the the can the XXXX? you. we the we towards of get just about year? we then how as historical just that think am talk the loaded, think some end now when back to and we do you and of progression

Tim Stonesifer

Yes.

we ‘XX. again XX% the feel think about I – XX% to I very think in good

QX to be low will in have QX. from you go seasonality. QX we I We mean typical if

at and some ‘XX to you seasonality. EGOP, that So, if you will look go back the ‘XX ‘XX or or see of

year, be that costs that out took half you not of last will thing second $XXX have when other was of the that million of The $XXX of million in all we run-rate.

see although little you will QX to savings compare going a when forward cost we So, be will we bit lighter. QX

again half. will two-thirds so savings margins if go still cost QX at then $XXX be pressured, in of earlier So, look that million you or the second you roughly said but as as forward I that is of

we load year. The progress continue it to again course M&A go will as the that, we the So, cost continue to envelopes up way. you of as can right-size that of out that through the

continue we those mix, nice a compute Aruba mix, a all-flash heavier lines point natural then and high-performance – and get product should to we as So grow become lift.

to expect to throughout would continue to year course see will XX% margins XX% the and of the improve those QX but we up somewhat range. wound in So, pressured, the

Andrew Simanek

Thank Can Shannon. Perfect. question you, the have we next please?

Operator

from Citi. Our ahead. Jim Please go next Suva comes with question

Jim Suva

you Thank much. very

First of time. I ask the tough…. for at kind for a Antonio, you then question Tim and a them very question same had since a Antonio will

Andrew Simanek

We the Meg and just have call. on Tim

Jim Suva

Got it.

and about on more you understand that us is of Tim year-over-year. XX% for services? are terms over it you connect was there question that I can lot that? or what’s heard with that? up the went you, Meg relatively financial hey, Investor Okay, the financial with a and HP they change volumes help the up fair analysis offering talked his going it consistent we on you about well, something like say I HPE the have or of stage program do program strategy prevalent leadership HPE that we what Yet is dots time, internally – we from Next the advantageous guess And or very sometimes Next Day how say the at X services think is given to

Meg Whitman

Yes, me let question. the answer strategy

and I. Next. the remain crafted entirely HPE consistent. It he So, was has Antonio been strategy leading will by

are on think And of terms don’t in lead he the that. completely another going is I aligned strategy. So, we one to reinventing

sales As is field. see way working working, you it’s in the the entire team, by organization the it can as is and the

So, from you consistent can expect Antonio. strategy entirely

Tim Stonesifer

as as as well services leases financial as the large a far And have buyout mix did XX% goes two operating fact compared that We year. a by of we lease was as driven heavier one-time have things. last that to

that’s XX%. So, really driving what’s the

X% two to normalized perform business to view, continues items about those have out more that get well. strip But a you growth. we If

and We are consecutive was that sixth quarter. our growing

at look job. team and our loss you the is our remarketing doing capabilities, If ratios nice a

Jim Suva

for Thanks the greatly appreciated. so much details. It’s

Andrew Simanek

question Great. Thank on you, Jim. please? next Can the we to go

Operator

from question comes go Milunovich UBS. next with ahead. Our Steve Please

Steve Milunovich

the and NAND first longer they over you. could How you how two step commodity impact how issues your storage maybe of tenure terms during what be quantify heard you costs second both NAND view that’s and customers technology on they in of year then issue for gross earlier no that getting your kind – in for back can HPE. just had would at from think higher different and Thank think just the have questions also of the you an HPE? all Tim, about their about you margin Meg and and My investing for enough the from is you’re some

Tim Stonesifer

Okay.

hold its dynamics same year the On the probably lift pricing the XX% again million. the $XXX commodity cost for is course of couple assuming

earlier So memory. year the to there, NAND now in as limited and there the but extent of are had year minimal as have over goes the course far constraint some increases been we of have not price supply the fairly and those the

Meg Whitman

go servers, whole R&D of customers would right he’d executing is we with I Superdome broad against way what just segments. those we then for Enterprise so a be conglomerate PCs and Integrity sure relevant front partners that Yes, was is an Software customers they what were This HPE X and any more was. and weren’t of the not you was stood in would to talking lot it and say Services, and it enormous too

move proposition know on-prem whole flexible HPE and capacity is the driven data offering, they every now and a a say, moved our to ways defined over it’s to our to I then innovation workload and encouraging we’ve the And agenda model to last going stack for like a stack core people announcement I with do actually value discovered milestone public new the the need stand be stone more center This relevant some what is new cloud. is So week, think cloud economics. public to to and X next cap that’s in software we years. the pay-per-use

better on we ago, the a that just those X I I’d I far opportunities this more think X to move ago. at jump now say years seen than nimble, would agile frankly main years it company are you like problems say have speed far So and the things, more which it’s company was would run a also company and on we I was slower then

Andrew Simanek

Perfect. Thanks, please? to question the Steve. go next we Can

Operator

ahead. Please Our is next from Capital go question RBC with Markets. Amit Daryanani

Amit Daryanani

is a like fiscal at Good the XX% the talking ‘XX QX I so kind it well. me the thanks Hi, be year vector lot. guys really EPS growth give year of you questions have of initiative, confidence will QX levers a full loaded afternoon, and XX.X%, than that you you which comfort back half you of from look give it guess lever around restructuring and couple guide, of normal. about you historically, about about talk Could the what is as different to XX% more seems much about When that I guys. other is are half so implications much back the that better back in that end it just all here?

Tim Stonesifer

go will back I Again, things. Yes. to two

memory seasonality happen so part costs year’s last last year skewed latter at the little as increase looking a at one, as because again far bit remember didn’t of that of call January. it’s the increases, As until example, an

driver this or go I is full look really you DRAM back we think elevated have of impact HPE when it’s that Again So biggest whereas the Next. full impact year quarter year a I’ll at costs pressure.

cost of of in clean two two year is again thoughtful that reason how look being this two of the that back can exercise implement do one doing very at minimize the of is when $XXX disruption. So thirds we’re roughly business this that that as million we’re thirds we when correctly, sheet then half how the we you are savings and and

we the the that of the because platform, work if the does want the that think rationalization, as little example get to time So reducing simplification take sure right. you to make SKU a through, structure we an regional

things, the disruption, big minimize the primary Next about that I the the that’s spoke we driver. HPE the M&A along really so driver So other any is of with and business but some

Meg Whitman

that note we And were now but losing acquisitions I think that worked when mentioned virtually money and acquired think just accretive them, of of we actually have that of the them important you in so number these I be to and all it’s will XXXX.

Amit Daryanani

on If on missed much helpful. you to storage how That’s more bit you headwind just I it, really of timeline because maybe some and of it much a days I the a done go-to-market think a of is alluded or revenues follow-up think that table, side, left how it to in longer but or it’s the you could timeframe? quantify you the resolve the XX challenges of you

Meg Whitman

say I our that I the Phil can’t. a of is is new don’t would think sales storage think we team on Davis hitting will Head Sales who call. I comes ground on quantify is So, this the running storage. background. from What we

leaders. perhaps you than see our to him of earlier think storage some I pivot will So, harder naturally sales

And did in in so the we you will well very in U.S. improvement APJ. see very well think way, I And by EMEA,

will in you an I U.S. in space. see improvement the So, think the storage

Amit Daryanani

you. Thank

Andrew Simanek

Great. Thanks, Simon.

please. question Next

Operator

from go with Group. Miscioscia Pivotal ahead. Our comes question Research Please next Lou

Lou Miscioscia

have thank could will specifically, with what you your with And us just mention competitor? a you extra do to that to any a are And from if not Okay, mention you spend you all maybe time to family. and going or follow-up? restriction planning you. time Maybe do I more chance have

Meg Whitman

I actually member. chance, Antonio there love with then am through I be quite to would I a XX to work the going I is a loyal transition become to to after am go Hewlett-Packard Listen this January and actually competitor. career, competitor, to to the I very but downtime, active end chance. at say And no Hewlett-Packard take and of year to nonstop board a no little company of first I going Enterprise, have and I a have all, come I will So, a never

Lou Miscioscia

very but had more much follow-up at data I to not had Nimble with look you when product is the again hit I Okay. it’s done unstructured block really Then at you my has very of I associated on guess majority and line, the think the and storage you is. much where unstructured Analyst am obviously the as well, Meeting growth that familiar just that have

problem So, I you line am just wondering is really add products possibly do more acquisition? to product a to the possibly another do or it sales actually have and/or

Meg Whitman

Yes.

the explosion business we benefiting from and is every single day. storage the data think I are listen of that So, seeing

think tell it’s AI a been at are in us we product customers reputation We Nimble HP when no successful everyday customers. service benefit way game whether company, also small be in line by by because going And Aruba, has also complementary reason you came that a already buy accelerated company from less to is Aruba is With a had embedded perspective, the Is maintenance. listen its changer big being because stellar I it’s startup I I me think rate etcetera. the because not acquisitions, think the part distribution etcetera growing that had perspective channels, under of there the Aruba before benefiting a to a way becoming server backed is storage a that or following. XX% analytics business that warranty it’s had somewhat does SimpliVity, is we to storage I that for they into than our the know InfoSight architecture. one storage growth – can predictive our profile get They and major by leveraging from regard HP, arrays we acquisition to standalone can predictive a acquisitions. to on to own that for and it’s technology Aruba for this what, is by introduce

look are kind those we So, the of at. that acquisitions

very have and something clear from about priced found we a approach take-out whether it think business I that would returns was the a by right based benefited very about in seen was disciplined the be will case, and acceleration. you distribution business disciplined doing make saw Tim storage they it’s and it. might So, important cost acquisitions, board be right, continue or company channel that I if acquisitions. we we And I good to and our that we But and I on have do. you And thought that promise to Tim business the will Antonio case sure think

Andrew Simanek

Lou. Thanks, Perfect.

I think for time question we last one please. have

Operator

Capital with Long from comes question last Tim Please go Markets. Our BMO ahead.

Tim Long

Thank you.

Just here. to Two a for business bit. little networking move the

be data the really partnership center quarters it you it’s you and could business on First little secondly, the Aruba Will pay-as-you-go with you with update you. the that the the move on model? well Thank What is if on have impact just about to you? an will have done models last And piece well? Cisco’s then synergies of bit talk more the product obviously the recurring you do few rest how could campus portfolio kind business that for your a helped. switching with new and as talk Could side, revenue opportunity think us going? will

Meg Whitman

has revenue capacity Increasingly, ‘XX particularly thesis that had case, And just happy United any annuity-based are actually particularly portfolio buy And the pay-as-you-go, flexible see the are would on we we was we that way where both be stream the product to model wireless out we in and Aruba had the for demand along and wireless, wired want for drag a do Yes, great model. when wired like Aruba, that so a actually for strong in right. Aruba a to bought ‘XX. the a a year capacity the to sell, great flexible has QX. Aruba. who really other wired turned fiscal States, you people

momentum first category top the or We Cisco spot in in and – first Tim also is referred Quadrant Magic the marketplace. it’s been can I this three the vision benefiting feel the and in referred a for are the owned in where decades script time we in the think not we I leader are Gartner has that to to from time that the that networking

a of and the not from it, So, into would are about what dig leasing offering, different that’s really a number competitors as talking entwined it’s it’s is of not not we model listen and just with are it – offering. same of sort services actually we capacity, we our glorified clone thing flex it’s are

regard So, to Arista, to we that think we have With partnership so go a competitive advantage. continues along.

up to it’s opening our along direct I sales in are channel think going We group opportunity. our nicely. the data center And

where nicely there along it’s both could we quite but more I are we the pleased better. think are, and I At moment think do we there. can with going be

Tim Long

you. Thank

Andrew Simanek

Tim. Thanks, Great.

wrap with think up I that, can today’s call. we

Operator

this gentlemen, you. Thank call our for and Ladies today. concludes

Hewlett Packard Enterprise (HPE) 21 Nov 172017 Q4 Earnings call transcript