Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: You're listening to Bloomberg Business Week with Carol mess Here
Speaker 2: and Tim Steneveek on Bloomberg Radio.
Speaker 1: All Right.
Speaker 3: From New York Community Bank to HPE, we go.
Speaker 4: Yeah.
Speaker 2: Shares down about four point two percent in the after
Speaker 2: hours this after the company reduced its outlook for sales
Speaker 2: growth and profit in the current fiscal year, citing lower
Speaker 2: demand for networking products and a crunch in computer chip availability.
Speaker 2: We got with us Crawford del Pratt, president of IDC,
Speaker 2: and he caught up with the HP CEO right after
Speaker 2: the results. Crawford, good to have you with us, joining
Speaker 2: us from Massachusetts this afternoon. First of all, your thoughts
Speaker 2: on the quarter and on the company reducing its outlook
Speaker 2: for sales growth for the fiscal year, and also what
Speaker 2: did you hear from Antonio Nari?
Speaker 4: Yeah, absolutely, Carrollton, great to talk to you guys again.
Speaker 4: So when you look at HP, I think that the
Speaker 4: first thing you have to think about out is that
Speaker 4: this isn't the old HPE that we've kind of known.
Speaker 4: This company has been going after the networking space and
Speaker 4: has really been succeeding in the networking space for a
Speaker 4: number of quarters, and if you look at where they
Speaker 4: were over the last at six quarters, they were growing
Speaker 4: their networking business, which is primarily a company they bought
Speaker 4: a number of years ago called a Ruba Networks, which
Speaker 4: is sort of campus networking and networking out of the
Speaker 4: edge of the network. That was growing an excess of
Speaker 4: thirty percent. And so like we saw at Cisco, you've
Speaker 4: seen that we've pushed a lot of product out to customers,
Speaker 4: and customers have said, you know, we're going to take
Speaker 4: a pause here, and so they've taken a pause, and
Speaker 4: HP saw, you know, their networking business. They're what they
Speaker 4: call their intelligent edge business, which is the majority of
Speaker 4: the Erican business, up about only three percent, which compares
Speaker 4: with the thirty percent kind of range. So you know,
Speaker 4: that's kind of this one big part of the story
Speaker 4: here is that the intelligent edges dropped down. The other
Speaker 4: part of the story is that obviously from a from
Speaker 4: a total growth standpoint, the company didn't even deliver on
Speaker 4: the low end of their of their range. So they
Speaker 4: were they were down fourteen percent, and that was fueled
Speaker 4: by what I would say was, you know, weakness in
Speaker 4: sort of that that core server space which was down
Speaker 4: about twenty three percent in terms of total revenue. And
Speaker 4: so what I what I heard from Antonio, you know,
Speaker 4: understandably is that they've taken a tremendous amount of cost
Speaker 4: out of this business. And so from a margin standpoint,
Speaker 4: I think that you know, from a defensive standpoint, they've
Speaker 4: they've they've made a lot of progress, and that's really
Speaker 4: what they did was to hedge against the cyclical nature
Speaker 4: of the business, also hedging against the cynical nature of
Speaker 4: the business. And rightly so, you know, they've seen forty
Speaker 4: one percent in their arr growth. So people think of
Speaker 4: HP as a gear company, but really they've got a
Speaker 4: platform for them to sell as a service gear as
Speaker 4: well as services around that year and that business continues
Speaker 4: to grow and over time, as we have seen, will
Speaker 4: continue to see that deferred revenue a crew to HP's
Speaker 4: revenue stream. So you know, again it was a mixed quarter,
Speaker 4: definitely a pause on the part of a core part
Speaker 4: of their business that have been fueling growth.
Speaker 5: And you know, I think that this is where they're
Speaker 5: playing a little bit of defense.
Speaker 3: You talking with Antonio and Nery the CEO, and I
Speaker 3: guess our folks did too, and saying that downward revision
Speaker 3: in terms of the outlook is due primarily to that
Speaker 3: slow down on the networking market and a lack of
Speaker 3: availability of graphics processor units required to deliver high powered servers,
Speaker 3: telling all of us those we're talking about GPUs right,
Speaker 3: and he did say it looks like should improve in
Speaker 3: the second half of the year. The networking market is
Speaker 3: poised to recover in fiscal twenty twenty five. He said,
Speaker 3: I mean, what was top of mind for you as
Speaker 3: you talked with him Crawford about.
Speaker 4: Yeah, so as they talked to top of mind for
Speaker 4: me is yeah, thanks Carol. So top of mind was,
Speaker 4: you know, sort of why is it that when? When
Speaker 4: do we expect GPUs to get better? And and and
Speaker 4: and what they've seen is a significant amount of of
Speaker 4: of of bookings. I think they have, you know, a
Speaker 4: significant amount of AI bookings uh in the quarter. I
Speaker 4: think they're going to be working down a set of
Speaker 4: AI bookings as UH they get I think with something
Speaker 4: a number somewhere around three billion that they're going to
Speaker 4: be working down for customer commitments that that they already
Speaker 4: have UH in place. And so you know, I think
Speaker 4: what you're seeing is similar to a lot of companies
Speaker 4: in that we are seeing a massive infrastructure upgrade within
Speaker 4: customer sets and it's really about who can get availability,
Speaker 4: who's got the scale. And I think that ended up being,
Speaker 4: you know, one difficulty point for HP in the quarter
Speaker 4: in that you know, the availability just isn't there. But
Speaker 4: I think that you know, we saw announcements from Intel,
Speaker 4: We've seen announcements from a m D. I think we're
Speaker 4: good want to see a significant availability in the second
Speaker 4: half of the year, and that I think is going
Speaker 4: to fuel a sustained set of growth and and Antonio
Speaker 4: talked about that for the infrastructure space as we get
Speaker 4: into the later part of the year, and I think
Speaker 4: i DC's numbers reflect that we expect the server and
Speaker 4: storage market to deliver somewhere between six to eight percent
Speaker 4: growth this year, and that's gonna be fueled on AI.
Speaker 2: Well, that's what That's exactly what I want to talk about, Crawford,
Speaker 2: was HPE's exposure to AI. And I'm wondering this from
Speaker 2: the perspective of, Okay, we know that IT spend is
Speaker 2: going up this year, and I know there's a lot
Speaker 2: of talk of a lot of that spend going toward
Speaker 2: companies like Nvidia, companies like super Micro to what extent
Speaker 2: is HPE of beneficiary of the run up in AI.
Speaker 5: Oh, they're they're a massive beneficiary. And they're they're they're a.
Speaker 4: Massive beneficiary by the way, as our Dell and and
Speaker 4: and and and as is you know companies like Lenovo,
Speaker 4: other infrastructure companies. HP IS. HPE is a little bit different,
Speaker 4: and they're different because of the bets that they've made
Speaker 4: around the network.
Speaker 5: And the edge.
Speaker 4: So they are going to be able to provide devices
Speaker 4: that are going to be processing at the core, which
Speaker 4: is their core server business. And don't forget these guys
Speaker 4: have a very very large footprint in supercomputers, which is
Speaker 4: going to be another area of AI growth and AI
Speaker 4: investment going forward as well at the edge, where I
Speaker 4: think we're going to see more what they call inferencing
Speaker 4: at the edge, being able to process at the edge
Speaker 4: in order to make decisions very very quickly on your data.
Speaker 4: They're going to do that through Aruba, and they're going
Speaker 4: to do that through an acquisition that they just made
Speaker 4: with it that they've announced, which is Juniper Networks as well.
Speaker 4: They're going to be able to benefit from what I
Speaker 4: would say is the need for more ports because of AI. Right, So,
Speaker 4: as AI continues to proliferate, you're going to need to
Speaker 4: move more network. You need to move more data across
Speaker 4: the network, which means you're going to need more advanced
Speaker 4: switching technology. And that's where their Juniper acquisition is going
Speaker 4: to come in. So you need to think of it
Speaker 4: as opening up the interstate highway, right, to open up
Speaker 4: the Interstate Highway, and HP is going to benefit from
Speaker 4: that as they close the Juniper deal. From those three
Speaker 4: to poor edge and network.
Speaker 3: Hey, listen real quickly. Because Dell came out, it stock
Speaker 3: is taking off big time in the aftermarket. They've reported
Speaker 3: better than expected sales, the top estimates on AI server excitement.
Speaker 3: How do you contrast what we're hearing with Dell versus
Speaker 3: what we're kind of hearing kind of on the HPE
Speaker 3: side And just got about twenty seconds.
Speaker 5: Yeah, So I think a couple of things. A.
Speaker 4: I think that Dell had probably better availability and was
Speaker 4: able to get better sell through on GPUs, which again
Speaker 4: you know late breaking news here. The other is Dell
Speaker 4: doesn't have the same level exposure to the networking market,
Speaker 4: which is what we kind of just talked about, so
Speaker 4: Dell's able to really benefit if they can get them
Speaker 4: by selling these GPUs.
Speaker 3: All right, great stuff as always, Crawford, thank you so much.
Speaker 3: Busy afternoon for you and really appreciate you carving out
Speaker 3: some time for us. Crawford del Prett, president of IDC,
Speaker 3: joining us from Massachusetts. Shares of HPE down about three percent,
Speaker 3: Dell is up sixteen percent in the aftermarket.
Speaker 2: There are a lot of people out there who worry
Speaker 2: about money. In fact, if you worry about money, you're
Speaker 2: not alone. A new study from Wells Fargo says that
Speaker 2: more than half of Americans fifty six percent in fact,
Speaker 2: say they always worry about money even when they have enough.
Speaker 3: Yeah, two thirds of Americans have decreased their spending due
Speaker 3: to the economy. These are just a couple of the
Speaker 3: nuggets in the Wells Fargo Money Study. It's a new
Speaker 3: study app for the bank and looking for us. Michael
Speaker 3: Leers is here. He's head of Advice in Planning at
Speaker 3: Wells Fargo, joining us here in our Bloomberg Interactive Broker studio.
Speaker 2: Well is this just the human condition that no matter
Speaker 2: how much money somebody has, they're going to be worried
Speaker 2: about money.
Speaker 1: There's an element of that, but part of this is
Speaker 1: also the narrative out there, okay, what money means, and
Speaker 1: you see it in social media, you see it in conversations,
Speaker 1: which is money might not be taking us as far
Speaker 1: as it used to, and so that's creating Actually, in
Speaker 1: our study, it actually creates an extraordinary worry beyond what
Speaker 1: people said they worried about when they're younger.
Speaker 2: We were just talking about this with our TV crew
Speaker 2: about the price of a eating out for lunch or
Speaker 2: the price of getting a salad delivered. It's a stickershock
Speaker 2: for a lot of people, it is.
Speaker 3: It's kind of ridiculous, or buying a piece of pizza.
Speaker 3: Buying a pizza and you're like spending fifty bucks, you
Speaker 3: like it.
Speaker 2: You give me such a hard time for hoarding snacks
Speaker 2: upstairs here where we have they're so generous with their
Speaker 2: snacks here, Like you walk by my desk and it's
Speaker 2: just like it's a buffet of FREEINGA No.
Speaker 3: But it's interesting what you say about kind of how
Speaker 3: we think about money. What is I've often thought about it.
Speaker 3: In a society, we're increasingly aren't handling cash like are
Speaker 3: we getting distorted that we just kind of, you know,
Speaker 3: digitally doing everything, then all of a sudden we're like,
Speaker 3: oh my god, where did it all go? But anyway,
Speaker 3: tell us more about you.
Speaker 1: There's a piece of that. I mean, we ask people
Speaker 1: what they do every week, and they said things like
Speaker 1: spend nine hours scrolling social media and three hours a
Speaker 1: week looking at their money. So to your point, we
Speaker 1: are actually not looking at our money as much as
Speaker 1: we used to because remember when we used to have
Speaker 1: like clips that would put our money in wads and
Speaker 1: we put them in our pocket, or we'd actually eat
Speaker 1: your point, take out the cash get changed, or we'd
Speaker 1: have a piggy bank.
Speaker 2: When I was a kid, my parents taught me how
Speaker 2: to balance a checkbook and like, if I didn't balance
Speaker 2: my checkbook at the end of the month, yeah, we'd
Speaker 2: get in trouble and my parents would be like, okay.
Speaker 1: Where So we asked teens actually about their anxieties related
Speaker 1: to money in the survey, and we do something called
Speaker 1: the Taco Load Protocol where we just have conversations like this,
Speaker 1: And one of the teens said they didn't even know
Speaker 1: what a bank account was, and they wanted us to
Speaker 1: explain it to them. So you're spot on, You're right,
Speaker 1: it's not the typical thing these days.
Speaker 3: Well, I feel like in my whole career, there's a
Speaker 3: couple things that we've always talked about, more women in
Speaker 3: executive suites and diversity and the importance of that, and
Speaker 3: yet we're still struggling with some of this stuff. But
Speaker 3: the other thing is financial literacy and the importance of
Speaker 3: teaching kids at a younger generation. I feel like kids,
Speaker 3: I don't know whether it's grade school, whether it's in
Speaker 3: middle school, but somewhere home economics is going to the wayside.
Speaker 3: But we need financial economics being taught in schools. We
Speaker 3: talk about it, why aren't we doing it, and what
Speaker 3: the impact could be.
Speaker 1: Well, what's important to think about is where do teens
Speaker 1: and young people want to get the information? We asked
Speaker 1: that question and where they get it? Yeah, and they
Speaker 1: do get it from their parents, So that's where they
Speaker 1: want to and that's where they actually get the information.
Speaker 1: So we can look to let's say third parties to
Speaker 1: give our kids that information, but really they're looking to
Speaker 1: their family units to provide information about money, information about
Speaker 1: saving and investing, what to do with it, what constitutes
Speaker 1: things that are aligned with your values versus misaligned. And
Speaker 1: teens want that information and actually they said they want
Speaker 1: it from their parents, but they're also looking to banks
Speaker 1: to provide the information too.
Speaker 3: But don't you think about it, like we talk about
Speaker 3: so if your parents aren't great managing money, then you
Speaker 3: pass on those bad habits. So I just wonder how
Speaker 3: do you break kind of the.
Speaker 2: Stories about that. Absolutely, people can be open on social
Speaker 2: media this stuff with stuff like that, and also like
Speaker 2: how they break those habits which cannot be which is difficult.
Speaker 1: Well, what are the toughest habits that teens say that
Speaker 1: they observe and they do themselves. Is lying about money,
Speaker 1: how much they spend, how much their house is worth.
Speaker 1: So adults admitted to doing it, but teams admitted it
Speaker 1: to doing it even more than adults. So we can say,
Speaker 1: what's going on to your point behind the scenes, how
Speaker 1: do we get past it? And what people say is
Speaker 1: there's just not a lot of money conversations going on
Speaker 1: in their families at all. So it's still something we're
Speaker 1: reluctant to talk about for whatever reason.
Speaker 2: It's also I think hard, like you know, as a
Speaker 2: parent of young kids, it's like a heart. It's kind
Speaker 2: of a hard thing to talk about, you know, because like,
Speaker 2: for example, I'm out with you know, my son who's five,
Speaker 2: and he wants a snack and I'm like, no, you
Speaker 2: can't have a snack, Like we can't buy a snack
Speaker 2: every time we leave the house, right, And he's like,
Speaker 2: is it because you don't have any money? And I'm
Speaker 2: like kind of, I mean yes and no. One time
Speaker 2: he told me to go to the money store. He's like,
Speaker 2: can't you order some money? So we have money?
Speaker 1: Well, money does grow on trees, Yes, apparently it does.
Speaker 3: Hey, way.
Speaker 2: We can we can learn a thing or two from
Speaker 2: young kids. Right, you break this down into different categories.
Speaker 2: One of the categories you define is the young affluent. Yes,
Speaker 2: who was young? Who are the young affluent?
Speaker 1: So when we think of young affluent, think of twenty somethings.
Speaker 1: And when you think of twenty somethings, think of human
Speaker 1: beings who have anywhere between two hundred and fifty thousand
Speaker 1: to ten million dollars in assets. So it's a broad
Speaker 1: range of young people who actually are earning a lot
Speaker 1: and saving and investing a lot. Maybe they own a
Speaker 1: home that's impressible. And what was very impressive about them
Speaker 1: is they're the most likely to want to do things
Speaker 1: like plan not delay their life because of money, but
Speaker 1: they want to be more and more intentional about it.
Speaker 1: So they seem to be one of the more optimistic
Speaker 1: and planful groups of any of the groups we talk to.
Speaker 3: I am wondering in terms of this survey, and Michael,
Speaker 3: you know what you got. You're over at Wells Fargo.
Speaker 3: We are constantly whether it's government data points on consumers,
Speaker 3: how they're doing, how they're spending, whether we talk to CEOs,
Speaker 3: consumer facing CEOs. We've done that a lot, certainly this
Speaker 3: earning season. But I'm wondering what this survey helped you
Speaker 3: kind of say about the financial health of consumers or
Speaker 3: society right now.
Speaker 1: Two things. One is that Americans are relentlessly optimistic, and
Speaker 1: so what the majority of our survey participants told us
Speaker 1: is they wanted to stop talking about problems. And so
Speaker 1: when you think of concepts like financial health, that's nice,
Speaker 1: but what they wanted is this solution, less of an assessment,
Speaker 1: more will tell me how I should be thinking about money,
Speaker 1: what I should be doing. The second thing is they're
Speaker 1: very eager to do things like figure out how to
Speaker 1: stick with a saving an investing plan. It's not that
Speaker 1: they don't know that that's important. How do you stick
Speaker 1: with it? And they often think you have to do
Speaker 1: in big bite size now excuse me, large chunks rather
Speaker 1: than little bite sized chunks. They think bite sized chunks
Speaker 1: don't matter. So we have to reframe that. As you
Speaker 1: know financial services professionals, little tiny changes actually lead to big,
Speaker 1: extraordinary outcomes over two or three years. And I'm sure
Speaker 1: you see it. Your child polic sees it. If you
Speaker 1: put a couple quarters, if you were able to do
Speaker 1: that these days, and if higgybank we all remember this,
Speaker 1: you know, a month, two months, three months later you
Speaker 1: could buy it toy. These are the types of things
Speaker 1: we need to start re engaging in.
Speaker 2: Fortunately, lollipops and swim class are twenty five cents still, yes,
Speaker 2: so there are there are lessons to swim classes are
Speaker 2: not swim classes. I'm not even to get started on
Speaker 2: how expensive sluss. Hey, before you go, Michael, this is
Speaker 2: the first time that Wells Fargo has done this, so
Speaker 2: there's not this idea of comparing it to what's happened.
Speaker 2: What the research has said in previous years, but still,
Speaker 2: can you offer us any differences from earlier generations or
Speaker 2: how this thinking has changed.
Speaker 1: Well, so the thinking has changed in terms of Americans
Speaker 1: not wanting to feel judged by others or by themselves
Speaker 1: about money anymore. And that's something that I think people
Speaker 1: are more willing to accept. I think social media has
Speaker 1: got us more aware that that's not a great behavior.
Speaker 1: And the second thing is they really want to set goals.
Speaker 1: And so we have a capability called life Sync and
Speaker 1: our mobile app, and what it does is allows you
Speaker 1: to actually say, I want to manage credit and debt,
Speaker 1: I want to manage my spending. It can upload pictures
Speaker 1: to inspire you. So people want to be more inspired.
Speaker 1: And so that's where it's changing. People want to shift
Speaker 1: from pessimism, you know, toking let's say badly about themselves
Speaker 1: or judgmentally about themselves, and move toward optimistic ideas.
Speaker 3: I think there's apps and so on, and so far they
Speaker 3: kind of help you track your spending, kind of set
Speaker 3: your goals. Can be really really useful. I was just
Speaker 3: going to say, there were a bunch of kids just
Speaker 3: outside our studio. I didn't know if that was part
Speaker 3: of your survey.
Speaker 1: Or maybe I know them and I don't realize it,
Speaker 1: or maybe.
Speaker 4: They have started to add our healthcare team leader Cynthia
Speaker 4: Kuhons and our kids a couple of juice boxes.
Speaker 1: There is really adorable.
Speaker 3: This was fun, very interesting.
Speaker 1: Thank you so much for having me.
Speaker 3: Really appreciate Michael Yeah, head of advice and Planning over
Speaker 3: at Wells Fargo, joining us here in our interactive broker studio.
Speaker 3: You're listening and watching Bloomberg Business with Carol Master Tim Stenevik.
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