WEBVTT - HPE President & CEO Antonio Fabio Neri Talks Tariffs and Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>HPE says tariffs will have a smaller than expected impact

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<v Speaker 2>on sales this year. AI revenue also beat and assessimates,

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<v Speaker 2>but the company continues to face headwinds, and that includes

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<v Speaker 2>an activist investor. HPE CEO Anthony and Ery joins us, Now,

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<v Speaker 2>I find what you said about tariffs and how that's

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<v Speaker 2>reflected in the numbers so interesting because the Hyperscalers, for example,

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<v Speaker 2>told us that one reason capital expenditures were raised in

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<v Speaker 2>that period is the reflection of the higher cost of

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<v Speaker 2>doing business because of tariffs. For you, it's like almost

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<v Speaker 2>the opposite story.

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<v Speaker 3>Yeah, good morning, Ed, thanks for having me. Look, we'll

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<v Speaker 3>raise our guide thence for a number of factors. Number one,

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<v Speaker 3>because of all the war we have done throughout a

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<v Speaker 3>very diversified supply chain, we find ways to admit together

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<v Speaker 3>the TARA Obviously the USMCA plays a role in that.

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<v Speaker 3>But at the same time, we know we are performing

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<v Speaker 3>better in many of our businesses and we have had

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<v Speaker 3>a number of targeted actions to continue to mitigate any

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<v Speaker 3>impact from the tariff. And that's US today as we

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<v Speaker 3>know it. But the reality is that the original impact

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<v Speaker 3>we communicated at the earnest call in Q one now

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<v Speaker 3>is significant lesser and therefore, together with the cost actions,

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<v Speaker 3>together with the better performance of the business and the

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<v Speaker 3>lesser impact on tariff, will raise the bottom range of

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<v Speaker 3>our guide by eight cents.

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<v Speaker 2>Antonia, is it possible for you to quantify for us

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<v Speaker 2>the sort of sales channel impact that you provide from video?

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<v Speaker 2>So we talk endlessly about all of the projects domestic

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<v Speaker 2>and overseas, and videos involved in the great build out.

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<v Speaker 2>But as you know so well, and I spend hours

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<v Speaker 2>tearing servers apart, nothing happens without HPE and others assembling

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<v Speaker 2>the desigre. I just want a number on it, that's

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<v Speaker 2>the thing.

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<v Speaker 3>Yeah, Well, hard to put a number because you know,

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<v Speaker 3>many of these buildouts are happening as we speak, and

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<v Speaker 3>it takes a little bit of time to go from

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<v Speaker 3>a you know, an agreement with a customer working with

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<v Speaker 3>US and Nvidia, to building a deploying it and then

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<v Speaker 3>eventually putting in production. But I can tell you, look,

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<v Speaker 3>we are have a deep, long standing relationship with Nvidia.

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<v Speaker 3>We are covering all segments of the market where it's

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<v Speaker 3>these big, large buildouts in the service provider space. Whether

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<v Speaker 3>it's sovereign or enterprise. And one of the things I'm

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<v Speaker 3>really proud is that the work we put together with

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<v Speaker 3>Nvidia last last year when we announced the Nvidia competing

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<v Speaker 3>by HP and a private cloud, AI is growing very rapidly.

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<v Speaker 3>In fact, one third of the net new orders we

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<v Speaker 3>poked Q in Q two we're from enterprise. But at

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<v Speaker 3>the same time we are completing one of the largest

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<v Speaker 3>deployed MENS on the GB two hundred as we speak,

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<v Speaker 3>and that's a very large deployment. And then we said

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<v Speaker 3>that our backlog grew quarter over quarter now is three

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<v Speaker 3>point two billion dollars on a commulative basis. For the

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<v Speaker 3>last two years, we book over nine billion dollars and

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<v Speaker 3>we have a multiples of the backlog in our pipeline.

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<v Speaker 1>That one billion you attributed to AI in particular is good,

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<v Speaker 1>but it's not as much as Dell, for example. I

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<v Speaker 1>hate to put it so on the nose in that way, Antonio,

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<v Speaker 1>but how much is perhaps Elliott on your board or

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<v Speaker 1>others around you sort of saying, look, capitalize on AI

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<v Speaker 1>even more.

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<v Speaker 3>Yeah, now there has nothing to do. Look the previous

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<v Speaker 3>quarter that we book ourselves a very large order, which

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<v Speaker 3>is the one we are deploying today and that was

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<v Speaker 3>not the all didn't do that. So this is a

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<v Speaker 3>lumping business and you will see us also talking about

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<v Speaker 3>some of the large order as we may get in

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<v Speaker 3>the current quarter of subsequent quarter. So you know this

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<v Speaker 3>goes back and forth. But ultimately you have to play

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<v Speaker 3>with discipline and our goal is to grow in the

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<v Speaker 3>eye and the rest of the business with a capital

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<v Speaker 3>structure that works because the reality is that there is

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<v Speaker 3>revenue growth, then there is profit accretion, and then is

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<v Speaker 3>working capital. And our working capital is something you have

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<v Speaker 3>to work very very closely because the timing from winning

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<v Speaker 3>a deal to the time of revenue recognition in these

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<v Speaker 3>large deals can be long and therefore you impact cash

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<v Speaker 3>flow from operation. So we're trying to balance all of

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<v Speaker 3>that while we deliver on our commitments both on the

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<v Speaker 3>revenue growth and on the EPs growth.

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<v Speaker 1>Well, you delivered in terms of six percent revenue growth

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<v Speaker 1>on the court. We appreciate it Antonio andry Hpeco for

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<v Speaker 1>joining us.