Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome back to Bloomberg Tech.
Speaker 1: Let's get straight to earnings now, because shares of HPE
Speaker 1: they are training higher throughout this morning. The company reporting
Speaker 1: fiscal third quarter earnings, but did show operating margin in
Speaker 1: the server unit had narrowed. But the CEO an Tonio
Speaker 1: and Neery on the call telling investors, look, it's going
Speaker 1: to return to roughly ten percent by the end of
Speaker 1: the current period. Well, now we've got him here to
Speaker 1: explain a little bit more. HPE CEO Antonio Niry. We
Speaker 1: get into how you're building out this business, how Juniper
Speaker 1: adds to the networking side, but for now, the AI systems,
Speaker 1: this server unit, Howard, is profitability to improve.
Speaker 2: Well, good morning calleran, thanks for having me. We are
Speaker 2: very pleased with our quarter. It turned out to be
Speaker 2: very solid with record breaking performance on revenue and we
Speaker 2: expand the profitability sequentially. And to your around the service segment,
Speaker 2: we deliver what we say we will do. But most importantly,
Speaker 2: our traditional server business returning to a historical level. And
Speaker 2: so when I think about you four, we're going to
Speaker 2: see a return to approximately ten percent for the quarter
Speaker 2: because of the momentum in traditional servers, which by the way,
Speaker 2: group double digits here over here, and the balance of
Speaker 2: AI mix between sovere and an enterprise which now represents
Speaker 2: more than fifty percent of our orders compared to the
Speaker 2: service providers.
Speaker 1: So the AI serve a bit is that set to improve?
Speaker 1: How well broadly is the AI system's profitability improving as
Speaker 1: we see this monumental buildout of infrastructure.
Speaker 2: Well, as I think about the AI servers, I think
Speaker 2: it is important character to think about different customer types
Speaker 2: and how we participate in each of the segments. Should
Speaker 2: we think about the service providers and the hyperscals and
Speaker 2: the model buildings where a lot of the capital expenses
Speaker 2: are taking in place. To your point, we are now
Speaker 2: going to lead with networking for AI. We are extremely
Speaker 2: pleased we close the Juniper transaction. Junior is already a
Speaker 2: reference in many of those buildouts, and that's where how
Speaker 2: we're going to lead in that particular segment of the market.
Speaker 2: And we're going to sell the server compute platforms with
Speaker 2: our partner. What makes sense from a profitability perspective, But
Speaker 2: what we saw in the last couple of quarters in
Speaker 2: particular discorders sovereign and neo clouds and enterprise now represent
Speaker 2: more than sixty percent of the market. There, we participate
Speaker 2: in a slightly different approach which the market profile is different.
Speaker 2: We lead with a rack scale integrated architecture for the
Speaker 2: sovereign space, and we lead with an integrated solution for
Speaker 2: enterprise enterprise group for the seventh consecutive quorder, and we
Speaker 2: double the number of logos. And then in sovereign we
Speaker 2: grew more than two hundred and fifty percent, and we
Speaker 2: want some marquete deals in the Middle.
Speaker 3: East, Antonio, that might be the answer. Actually, I study
Speaker 3: the traditional server business and the storage business, and you're
Speaker 3: doing better than your peers Dell NetApp. But why are
Speaker 3: the dynamics better for you when you have these analogous
Speaker 3: businesses with those other names I mentioned.
Speaker 2: Is multiple things. At first, in the enterprise traditional server,
Speaker 2: we see a refreshed cycle taking place for age infrastructure
Speaker 2: with more richly configured servers. And we have two phenomenal
Speaker 2: platforms which is hppro I and JEN eleven and Gene twelve.
Speaker 2: We did a fantastic job in really hitting the sweet
Speaker 2: spot to the market with better performance per core, lower
Speaker 2: energy consumption, better security, quantum proof for them other and
Speaker 2: through WORLDD optimization. And so now as we go to
Speaker 2: the June twelve that AOP continues to growth and the
Speaker 2: ability to attach services is much higher. As I go
Speaker 2: to the storage business, we really transform the entire industry
Speaker 2: in my mind by deploying a consistent architecture, whether it
Speaker 2: is structural data block storage, or whether it's our structural
Speaker 2: data which you need for AI. And that's what we
Speaker 2: call the object data with file ingestion, so the customer
Speaker 2: can do one one investment with a peace of mind
Speaker 2: as they grow their data needs for AI. So I
Speaker 2: think that's what's resonating in the market. Butten we have
Speaker 2: a fantastic go to market. We play in one hundred
Speaker 2: and seventy two countries and that reach together where the
Speaker 2: partner is a major differentiation. In addition to the fact
Speaker 2: that green Lake provides through AI dream and life cycle
Speaker 2: management serviability.
Speaker 3: Those are the things specific to you, Antony, would you
Speaker 3: give me an outlook for enterprise IT spending And because
Speaker 3: we have a lot of macro uncertainty right now, and
Speaker 3: you must see in the pipeline how that uncertainty is
Speaker 3: really manifesting.
Speaker 2: I was based on our pipeline, first of all, is
Speaker 2: solid across the three segments we participate in networking, server,
Speaker 2: and hybrid cloud. It is uniform across the three geos.
Speaker 2: There was another question in another interview that how North
Speaker 2: America versus orders are doing. North America did very very
Speaker 2: well for us this quarter, and so I think the
Speaker 2: demand will continue to be there. Every enterprise have to
Speaker 2: modernize and deploy AI. We as a company of deploying
Speaker 2: very extensively. We see the productivity improvements across many functions
Speaker 2: and many businesses, so that will continue. But at the
Speaker 2: same time, there is a way to modernize the legacy
Speaker 2: by freeing up space, power and cooling so you can
Speaker 2: deploy this new technology. So we are very confident about
Speaker 2: the outlook and with Juniper, that outlook becomes even stronger
Speaker 2: because now we have a complete portfolio networking that makes
Speaker 2: us unique as we want to build the best networking
Speaker 2: business in a modern, secure, cloud, native and AI driven portfolio.
Speaker 1: And you're expecting to cut costs. I think with seeing
Speaker 1: six hundred million dollars in cost savings are expected by
Speaker 1: that combination. Antonio cost savings are necessary for many businesses
Speaker 1: right now, as you think about some of the pressure
Speaker 1: from tariffs, your bird's eye perspective on how much that's
Speaker 1: implicating your business.
Speaker 2: Right now, you have to have a mindset of continuously
Speaker 2: transform the company. That's a fact, and you know the
Speaker 2: future belongs to the fastest said all the time. But
Speaker 2: the at least six hundred million dollars in synergies is
Speaker 2: related just to the Juniper transaction, and I re iterated
Speaker 2: that yesterday, and then there is an incremental three hundred
Speaker 2: and fifty million dollars through three key strategic levers. Continue
Speaker 2: to optimize our portfolio, continue to optimize the workforce, and
Speaker 2: aggressively deploy this set of technologies. Another quarter is not
Speaker 2: just acustic out is a way to improve experiences and
Speaker 2: become more efficient and agile in this market which you
Speaker 2: have to react with in the moment. So we are
Speaker 2: very encouraged about what we're seeing and Juniper actually give
Speaker 2: us an opportunity to rethink some of the processes we
Speaker 2: have had for a long time.
Speaker 3: Here, Antonio, I ask you this every quarter, how is
Speaker 3: the relationship in partnership with Nvidia? But is Jensen one?
Speaker 3: We'd see it right for the supply chain and the partners.
Speaker 3: They give great visibility to future iteration as a product right,
Speaker 3: they commit to the annual cadence of new GPU. They're
Speaker 3: increasingly involved in the networking through Envy Link. Is anything
Speaker 3: changing for you because of the way that video operates
Speaker 3: generationally technology to technology every year.
Speaker 2: We have a fantastic strong partnership at the company level
Speaker 2: and at the personal level. Jensen is available in the moment.
Speaker 2: If I need something, he picks the phone and we chatted.
Speaker 2: We solve it. But I will say the following I
Speaker 2: think from a collaboration perspective, from a co engineering perspective.
Speaker 2: The proof of that is our AI factor for enterprise
Speaker 2: with a private cloud AI, we actually took a very
Speaker 2: different approach together with a video We integrated the entire
Speaker 2: Nvidia AI suite of software inside our green lay cloud.
Speaker 2: We took a software down into infrastructure and together we
Speaker 2: provide an integrated solution for our enterprise customers. That's a
Speaker 2: testament how you co engineer despite the fact a lot
Speaker 2: of the value is on the GPU, but reality is
Speaker 2: the software and the experience that you deliver. On the
Speaker 2: other hand, now with networking, we have another set of
Speaker 2: opportunities because above the envy Link and the spectrum ACS
Speaker 2: you refer to. You need a full data center architecture,
Speaker 2: and Vidia does not participate into that. Our major competitors
Speaker 2: obviously our Cisco and Arista, but Juriper has become the
Speaker 2: reference for many of these large AI deployments. But I
Speaker 2: do believe together with the Nvidia, we can do a
Speaker 2: better job in the way we deploy that copex and
Speaker 2: we run that infrastructure from an OPES perspective using AI
Speaker 2: technologies for that matter, in food manage the network. So
Speaker 2: we are very excited about that. And look, you know,
Speaker 2: in the last quard we announced new innovation together with Nvidia,
Speaker 2: the RTX six thousand pro, the latest Ultra you know Blackwell,
Speaker 2: we are committed to be time to market with Jensen
Speaker 2: and team.
Speaker 1: I'm interested by the adoption and generator of AI by
Speaker 1: the companies that are helping them become a reality. Of course,
Speaker 1: benefits your share price, which is near a record high, Antonio,
Speaker 1: But how is it benefiting your employees or indeed, how
Speaker 1: are the pilot's running because there's been a lot of
Speaker 1: questions about whether there's been efficacy there since the MIT report.
Speaker 2: Yeah, I think it's fair to say Carol and from
Speaker 2: generative AI to agent KI, and I think about agent
Speaker 2: KI as the next evolution for what really enterprise needed.
Speaker 2: And my view is that agent KI will transform business
Speaker 2: processes by simplifying them, automating them and then bring intelligence
Speaker 2: to it. In our company, we are using agent ki
Speaker 2: aggressively in our offers. So Green Lake Intelligence, which we
Speaker 2: announce it June, is one of the most comprehensive clouds
Speaker 2: that includes a gent ki observability in the way deploy
Speaker 2: and manage infrastructure and so forth. On the other hand,
Speaker 2: as a company, we are deploying agent KI across finance.
Speaker 2: Our CFO is incredible aggressive on this, so she is
Speaker 2: on the leading edge on this. Our marketing team uses
Speaker 2: for demand generation and the brand campaigns and targeting segments
Speaker 2: where it makes sense, and our services team is used
Speaker 2: to provide better support experiences in our supply chain. We
Speaker 2: use it for forecasting and planning, and there is many
Speaker 2: other examples of that. And so I think this generation
Speaker 2: generative I now became agentic AI. In the future of
Speaker 2: course will be the robotics part, but the productivity level
Speaker 2: we've see in is pretty significant and we are not
Speaker 2: put of a concept. We have deployed more than sixty
Speaker 2: use cases across the company and we have more than
Speaker 2: two hundred in testing as we speak. Some will fail,
Speaker 2: Carolund and that's fine, and the mentality there needs to
Speaker 2: be fell fast and improved and focus on our return
Speaker 2: and investor capital.
Speaker 3: Antonio, you've been CEO since the start of twenty eighteen.
Speaker 3: Where does HPE sit today relative to your big vision
Speaker 3: for what HPE is can or should be against your peers.
Speaker 2: When I became CEO, I had a vision to be
Speaker 2: at edge centric, cloud level and data driven company. We
Speaker 2: invested at the edge was the Ruba acquisition and we
Speaker 2: deliver tremendous value for our shaholders from seven hundred and
Speaker 2: fifty million dollar revenue all the way to over five billion.
Speaker 2: And obviously now the next move was the acquisition of
Speaker 2: Juniper to make this company a networking centric company, because
Speaker 2: I believe the next AI era here is the convergence
Speaker 2: of networking cloud. And then obviously the business process that
Speaker 2: we will run as an enterprise, and that to me
Speaker 2: is the core foundation that have been envisioned for our
Speaker 2: company going forward, and on our core foundation, we deliver
Speaker 2: the best cloud and AI experiences so is continued to
Speaker 2: be shaped. I'm very pleased with the progress, but let's
Speaker 2: not forget it's not just the division itself. It's how
Speaker 2: you execute with a culture, and I said the values
Speaker 2: that makes us unique. And HP has been recognized also
Speaker 2: along the way as one of the best places to
Speaker 2: come and work by many surveys and magazines and institutions.
Speaker 2: So my view is that we are are shipping the future,
Speaker 2: but ultimately is about delivering showholder value and we are
Speaker 2: going to be positioned for the next three years to
Speaker 2: accelerate that value. As you see today because our stock
Speaker 2: price still undervalue intermal multiples. Our goal is to deliver
Speaker 2: the value accelerated for our shareholders and be relevant to
Speaker 2: our customers in this new environment we live in.
Speaker 3: I should have just asked you if your stock price
Speaker 3: is undervalued. Antonni ANDERI President and CEO of HPE. Will
Speaker 3: leave it there, but a really robust conversation, Thank you
Speaker 3: very much,