Hewlett Packard Enterprise (HPE) is moving its headquarters to Houston, Texas, a reflection of the changes COVID-19 has brought.
In 2015, Hewlett Packard split into two companies. The original PC and printer division continued on as HP, Inc. HPE, on the other hand, focused on cloud services, software and IT infrastructure.
Antonio Neri, President and CEO, announced the plans to relocate headquarters from Silicon Valley to Houston, Texas. HPE already has a presence in Texas, with it being its largest employee site.
As we look to the future, our business needs, opportunities for cost savings, and team members’ preferences about the future of work, we have made the decision to relocate HPE’s headquarters to the new campus under construction in Spring, Texas, just outside of Houston.
The move is, at least in part, in response to the changes the COVID-19 pandemic has brought. Employees have become more accustomed to working remotely, leading to HPE embracing more flexibility. This, in turn, has caused the company to reevaluate its real estate strategy.
Houston fits in well with HPE’s long-term goals. As the fourth largest city, Houston is also the most diverse. This gives the company a broad pool from which to recruit. HPE is currently constructing a 440,000 square-foot campus that is expected to be operational in 2022. Neri emphasized relocation will be entirely voluntary, and there are no layoffs associated with this move.
At the same time, the company will keep its presence in Silicon Valley:
We aren’t leaving Silicon Valley, a region inextricably linked to our rich history and heritage since Bill and Dave founded Hewlett Packard. Our San Jose campus will remain a hub for technological talent and innovation.
Notably, San Jose will become the new headquarters for our Aruba Intelligent Edge business. The explosion of devices, applications and data at the edge continues to drive demand for secure connectivity, and through our Aruba business, we are uniquely positioned to take advantage of the $39 billion edge market opportunity, which the pandemic has only accelerated with the need for digital workplace solutions.
Neri is optimistic the decision was the right one, at the right time:
Given our company’s long history in the region, this move makes sense for HPE. The world has changed, and we are changing with it for the benefit of all of our stakeholders.
“Customers continue to affirm the need to accelerate the digital transformation and take advantage of the explosion of data we see around us,” says HPE CEO Antonio Neri. “This ultimately is the core aspect of how they derive an improved business outcome. We have a very complete portfolio from the edge to the cloud. Digital transformation starts with secure connectivity. We have a phenomenal platform called Aruba that provides a mobile-first cloud-first approach.”
Antonio Neri, President and CEO of Hewlett Packard Enterprise, discusses on CNBC the companies latest earnings driven by customers continuing to accelerate their digital transformation:
Customers Accelerating Their Digital Transformation
Customers continue to affirm the need to accelerate the digital transformation and take advantage of the explosion of data we see around us. This ultimately is the core aspect of how they derive (an improved) business outcome. Obviously, the uncertainty (do to the China trade war) can create a little bit of a pause. It takes a little bit longer for them to make decisions, particularly with larger deals. That’s what we saw (this quarter), elongated sell cycles.
We executed with incredible discipline both on the cost side and on the pricing side. We actually have done a remarkable job in the last seven quarters to continue to make our cost structure more competitive and to streamline everything across the company. When I became the CEO I established three key priorities for ourselves. One of them, at the core, was to start with our HP Next next program which was to rearchitect the company from the ground up. That included a cost-benefit but at the same time, a portfolio shift. We are seeing the benefit of the portfolio shift today in our margin profile. That gives us the ability to expand margins significantly. I believe we will deliver record levels of year-to-date free cash flow which gives us the confidence to raise the guidance again for seven consecutive quarters.
Digital Transformation Starts With Secure Connectivity
It (the Huawei issue) is an opportunity for us. We have a very complete portfolio from the edge to the cloud. Digital transformation starts with secure connectivity. We have a phenomenal platform called Aruba that provides a mobile-first cloud-first approach. At the same time, we are here to serve our customers in the countries where they participate. We have a very diverse global supply chain that allows us to navigate through these challenges. I take this as an opportunity for us to serve our customers better and continue to provide the value they’re looking for. Obviously, we need to navigate through this uncertainty, whether it is Huawei or others. At the end, we are really focused on our business and our customers.
As our CFO Tarek Robbiati said we are focusing this year on stabilizing our business. We continue to shift our portfolio to higher value, higher margin and deliver everything we can as a service to our customers. You see the results of that in a portfolio mix in key strategic growth areas like high performance compute, which is the backbone for how analytics and AI will be run going forward. We are extremely excited about the completion almost of the acquisition of Craig which will be completed by the end of Q4. At the same time, in the core business, we have to continue to deliver what I call world load optimized hybrid cloud solutions delivered as a service. We are on that journey. We have made tremendous progress. We have a truly differentiated offer called HPE GreenLake, which is to deliver everything as a service.
Customers Accelerating Their Digital Transformation, Says HPE CEO Antonio Neri
Hewlett Packard Enterprise and Cray have announced that the companies have entered into a definitive agreement under which HPE will acquire Cray for $35.00 per share in cash, in a transaction valued at approximately $1.3 billion, net of cash. “The main reason why we decided to pursue this acquisition is that the data around us is exploding,” Says HPE CEO Antonio Neri. “That data has value and the need to process that data faster continues to grow.”
Reason For Acquiring Cray – Data Around Us is Exploding
I’m super excited about the announcement today. The main reason why we decided to pursue this acquisition is that the data around us is exploding. That data has value and the need to process that data faster continues to grow. The need for high-performance computing is one element of processing that data faster. The combination of great technologies with Hewlett Packard Enterprise portfolio, which include both HPE Apollo and SGI, give us a unique set of capabilities to get us to the right business outcome from the data. What we are talking about is (improved outcomes) for machine learning, AI, as well as big data and intensive workloads. Cray brings these capabilities.
Cray has two-thirds of its business coming from the government side and one-third from the commercial side. Hewlett Packard Enterprise is the opposite with two-thirds from the commercial side and one-third from the government side. Obviously, the government has already requested for Cray to build Exascale computing. That’s on the basis of the foundation technologies that Cray has developed for some time which is what we call the interconnect fabric. For us, that level of innovation is important to scale our portfolio and continue to enter new markets like oil and gas, manufacturing, as well as academia.
Thirteen Acquisitions Under CEO – All Very Successful
I have done now thirteen acquisitions with this one. We have had an incredible discipline based on return on invested capital where we have acquired (important) intellectual property as well as bringing talent to the organization. Each of them has been very successful including Aruba Networks as well as what I call the SGI acquisition, Nimble Storage, and so forth. They have all been very successful.
When you think about the type of business it has obviously been a little bit lumpy on the Cray side but that’s because it takes time to build the systems with CAPEX upfront and then acceptance for the backend to recognize revenue. We believe the combinational of Cray added to our scale which is significantly larger will smooth the transition from the revenue profit perspective. It will also limit the CAPEX investment because both companies have similar capabilities and now we can use both in a scalable way that we couldn’t do before.
HPE CEO Antonio Neri: Reason For Acquiring Cray – Data Around Us is Exploding
We believe the Edge is the next frontier, says HPE CEO Antonio Neri. “When we talk about the enterprise of the future, we see an edge-centric, cloud-enabled, data-driven, enterprise,” notes Neri. “What that means is the cloud is moving closer to where the data is created. That’s driven by the use cases we see around us.”
Neri adds: “Whether it is healthcare, manufacturing, or transportation, everything is being connected. It started with connectivity and then soon after that is the security aspect. One thing is connecting devices and apps and one thing is connecting things to the network. That’s why our Aruba platform is such a unique asset because it provides connectivity and security with AI built-in at the core.”
Driving the Acceleration of the Digital Transformation
I would like to characterize that we had another strong quarter for the company. That’s further evidence that our strategy is working to accelerate the Intelligent Edge and to drive profitable growth in the core segment of the market called Hybrid IT. Because we are continuing to build our portfolio and we see the demand steady, we’re actually very confident to raise our guidance that we obviously beat in Q1. We see the rest of fiscal year 2019 as strong for us and give us the confidence to raise the guidance driven by the portfolio and the innovation we have and in the feedback we get from customers.
We see the demand steady. We have not seen any evidence of a downturn (due to tariffs, shutdown, etc.). Obviously, we are continuing to monitor the uncertainties around the globe, but the reality is that customers are making critical investment to drive that acceleration of the digital transformation. That’s all driven by the fact that the data around us has continued to grow. They need to extract the value of that data much faster than ever before. That’s why we see growth in segments like high performance compute, which for us grew 50 percent. Software around infrastructure grew 70 percent. Also, the connectivity in the Edge grew 20 percent in the wireless business. We see that as a continued trend.
When people ask me what’s going on around the globe with Brexit, for example, our UK business actually grew double digits. When you think about the government shutdown, actually one of the key products we sell in the government is high-performance compute, and it actually grew triple digits. So it has not had the impact, but obviously, we continue to monitor what’s going on around the globe.
Next Frontier: Edge Centric, Cloud-Enabled, Data-Driven
We believe the Edge is the next frontier. When we talk about the enterprise of the future, we see an Edge centric cloud-enabled data-driven enterprise. What that means is the cloud is moving closer to where the data is created. That’s driven by the use cases we see around us. Whether it is healthcare, manufacturing, or transportation, everything is being connected. It started with connectivity and then soon after that is the security aspect. One thing is connecting devices and apps and one thing is connecting things to the network. That’s why our Aruba platform is such a unique asset because it provides connectivity and security with AI built-in at the core.
3 Cs of the Intelligent Edge
Ultimately, it brings that cloud computing closer to actually where the data is created. We think about it as an integrated solution. Obviously, we need to provide customers the tools to be able to protect themselves and be compliant with the new regulatory policies being put in place, like for example, GPI in Europe. We are really focused on that and we actually believe we have one of the best solutions at the Edge today. The data continues to outpace the compute capacity and actually, 75 percent of that data is created at the Edge. That’s very exciting and that’s why I’m bullish about these Edge compute capabilities that the customers need going forward. It’s just physics.
AI is a Big Opportunity for Us
Two years from now we’re going to create twice the amount of data that we created in our entire human history. That data needs to be stored, it needs to be managed, it needs to be compliant, and most importantly, business outcome has to be derived. That’s why we see the need to bring that cloud compute closer to where the data is in a different form factor. We see AI as a big opportunity for us and all integrated with connectivity and security.
Customers are telling us that they are accelerating the digital transformation. We have a saying that the future belongs to the fast. People who can extract insights from the data faster are going to continue to win. We are very bullish about it because we have one of the best portfolios we ever had and our innovation is second to none.
The US is Ahead with 5G
5G is going to be an exciting opportunity for us. The US is ahead and is going to be one of the first countries, if not the first country together with Japan and others, to roll out 5G. We already see evidence of that. Our opportunity with 5G is to provide customers an integrated experience. 5G is a type of connectivity, but it is not the only type of connectivity. You are talking about 5G, talking about wire connectivity, you talk about wired network connectivity or wireless connectivity.
What customers are asking us is give me one integrated experience with one security control play. That’s where Aruba fits perfectly in that we’re going to provide a cloud-based solution that integrates 5G into that experience.
Every business has been disrupted by the digital transformation, says Hewlett Packard Enterprise President and CEO Antonio Neri. With that disruption is an explosion of valuable data. “That data has value,” says Neri. “Enterprises are looking to extract that value much faster than ever before because people who can get inside faster will win. We see that as a massive opportunity.”
Antonio Neri, President and CEO of Hewlett Packard Enterprise, discussed how the explosion of data, especially with the advent of 5G, is causing companies to invest in new technologies like AI and machine learning in order to extract maximum value from their data. Neri was interviewed by Fox Business at Davos 2019:
Extracting Value From Data is a Massive Opportunity
We live in an incredible time. Every business has been disrupted by the digital transformation. Occuring with that disruption is the explosion of the data we are creating. You just made a comment that data is the new oil. We say that data is the new currency. That data has value. Enterprises are looking to extract that value much faster than ever before because people who can get inside faster will win. We see that as a massive opportunity.
We are coming out of 2018 which was very strong. We saw an increase in spend in IT which was driven by security, more compute capacity, as well as storage capacity around this data. Also, we see the spend moving in a different direction. For example, new technologies like AI and machine learning to extract the value of the data. We see good momentum. Obviously, we see some signals for a little bit of slowdown. However, a little bit of slowdown doesn’t mean everything is going to stop. It’s actually still very strong.
Companies Are Digitizing Their Enterprises
I see companies putting more money into deploying new architectures like cloud and mobility. We live in a mobile-first approach. Companies are digitizing their enterprises making their enterprises much more efficient with this new technology.
Basically, they are moving faster than ever before. So we are actually very optimistic about the future. That data will continue to outpace the compute power which means that money will be spent in catching up with that need to process all of that data in real-time.
5G Accelerating the Digital Transformation of Every Industry
There’s obviously going to be a big investment in the telecommunications space to lay all this infrastructure. 5G actually favors the movement of data which means it is going to accelerate this transition and digital transformation of every industry. Last year at this event we talked about the Industrial Revolution 4.0. 5G will enable that because everything will be connected, everything will ingest data, and everything will process data.
We are very optimistic about the future of spending and the transformation of the business using this new technology. We think we are well positioned for the future and I think we have the portfolio to compete and win.
Extracting Value From Data is a Massive Opportunity, Says HPE President
