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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Shares of HPE are plunging today after the company said

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Speaker 2: profits in the coming year would be hurt by tariffs,

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Speaker 2: week margins on server sales, and execution issues. HPE also

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Speaker 2: saying it will look to eliminate three thousand jobs. Antonio Nairy,

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Speaker 2: HPE CEO, joins us now for more. Antonio, I know

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Speaker 2: it's a tough day, but give us a little bit

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Speaker 2: of clarity in terms of what you're seeing as the

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Speaker 2: turnaround plan.

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Speaker 3: Here. Yes, good morning, Thanks for having me today. Obviously

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Speaker 3: it's a disappointed day for me and for us as

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Speaker 3: a company. We had a solid quarter. We delivered on

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Speaker 3: our commitments. We grow our revenue double digits, up seventeen percent.

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Speaker 3: We had double digit growth in our bookings, but we

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Speaker 3: disappointed on one specific metric, which was the server operative margins.

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Speaker 3: Several operative margin was impacted by three specific issues. Two

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Speaker 3: in the traditional server business call it the X eighty six.

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Speaker 3: One was a very aggressive market, meaning a high discounting,

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Speaker 3: and second was a specific issue with the evaluation of

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Speaker 3: our inventory which caused us not to have the exact

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Speaker 3: right cost in that pricing. In the end of the quarter,

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Speaker 3: and those issues have been already fixed and we have

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Speaker 3: taken very aggressive action. On the AI side, we have

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Speaker 3: a higher than normal inventory related to the GPU transition

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Speaker 3: from the Copper of h one hundreds and two hundreds

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Speaker 3: intro Blackwell and in the quarter we booked one point

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Speaker 3: six billion dollars of new AI system orders, which was

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Speaker 3: doubled the orders that we had in Q four, but

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Speaker 3: seventy percent of that is on the black Bell side,

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Speaker 3: so the working capital aspect of that had a negative

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Speaker 3: impact on our operating margins for the servers. The rest

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Speaker 3: of the business is very, very strong, and inclusive of

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Speaker 3: the networking business, which had again another recovery on sequential

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Speaker 3: revenue double digit year over the year. Revenue growth our

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Speaker 3: hybrid cloud was up eleven percent year over the year,

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Speaker 3: and we had a very strong performance in our storage bookings.

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Speaker 3: So it was all in the suburb margin. But I

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Speaker 3: have to tell you because of the demand we selved.

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Speaker 3: It reinforced our strategies, right. We just need to execute

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Speaker 3: better than a couple of things and return to that

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Speaker 3: normal operating profit, which we are committed to do in

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Speaker 3: the second half. And then what we guided was inclusive

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Speaker 3: of that and the net impact of tariffs because now.

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Speaker 1: It's available on tarif Antonio, how much of a pain

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Speaker 1: to the bottom line and tari's going to be? Do

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Speaker 1: you have a clear guidance and number.

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Speaker 3: Yes, we did, Caroline. We guided that there would be

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Speaker 3: sevenpennies net of the mitigation impacts that we have now

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Speaker 3: put in place and will continue to execute throughout FIS

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Speaker 3: career twenty twenty five.

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Speaker 1: So worst case star do you build in there though, Antonio,

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Speaker 1: because at the moment, every day we get a different

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Speaker 1: twer of headline.

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Speaker 3: Well, we decided to go all in based on the

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Speaker 3: twenty five percent tariff in Mexico, the twenty five percent

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Speaker 3: tatics in Canada, which we don't produce in Canada today,

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Speaker 3: and the incremental ten percent meaning the twenty percent on China.

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Speaker 3: So we factor all that in and obviously we have

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Speaker 3: a mitigation strategy from a global supply chain and also

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Speaker 3: the pricing. So we decided to put it all in

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Speaker 3: at this part of time, and if some of that

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Speaker 3: doesn't get done, then you know, we'll obviously we'll get

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Speaker 3: the benefit of it. But right now, because kind of

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Speaker 3: what happened here is that because we did not guide

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Speaker 3: the full year waiting for the Juniper deal to close.

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Speaker 3: At the end of Q one, we decided to put

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Speaker 3: a flag pole out there for an investor. So they

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Speaker 3: have it all out there.

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Speaker 2: Can you give us an update there? Antonio, is where

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Speaker 2: the Department of Justices case stands.

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Speaker 3: Yes, of course, First of all, we are incredibly disappointed

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Speaker 3: the DOJ decide to file a lawsuit to try to

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Speaker 3: block the transaction. Their market analysis completely flawed. The narrow

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Speaker 3: the market to one sliver of the market called the

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Speaker 3: wireless land, and they felt there would be only three

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Speaker 3: vendors to play in the market. The reality are at

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Speaker 3: least the eight vendors, and many of them had this

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Speaker 3: exact same share as Juniper today. In addition, you know,

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Speaker 3: they don't consider that this is a great opporture for

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Speaker 3: the United States to strengthen our US national security outside

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Speaker 3: the country. So now the judge has been selected, the

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Speaker 3: judge has established July ninth as the trial date, and

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Speaker 3: we will defend this in court. So we expect to

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Speaker 3: prevail because we have a very compelling case, and therefore

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Speaker 3: we expect to close the transaction in twenty twenty five,

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Speaker 3: obviously delayed from the regional time.

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Speaker 2: We have about thirty seve left. But are you prepared

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Speaker 2: for the worst case scenario.

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Speaker 3: Meaning the deal doesn't close. We always have multiple options

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Speaker 3: on the table. Our feeder street duty together with my board,

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Speaker 3: is to drive the best return for our shareholders. We

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Speaker 3: felt that the Juriper transaction is the best long term

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Speaker 3: return that will shift the portfolio and create more earnings

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Speaker 3: and free cash flow because we committed at least four

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Speaker 3: hundred and fifty million dollars of synergies and so that's

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Speaker 3: where we're focused. However, there are different ways to create

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Speaker 3: shareholder value and all those options out on the table,

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Speaker 3: but right now we want.

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Speaker 1: To see this troup Antonio and nary Hpeco. Thanks so

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Speaker 1: much for joining us today.