WEBVTT - HPE CEO Antonio Neri Talks AI Era

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. Welcome back to Bloomberg Tech.

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<v Speaker 1>Let's get straight to earnings now, because shares of HPE

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<v Speaker 1>they are training higher throughout this morning. The company reporting

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<v Speaker 1>fiscal third quarter earnings, but did show operating margin in

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<v Speaker 1>the server unit had narrowed. But the CEO an Tonio

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<v Speaker 1>and Neery on the call telling investors, look, it's going

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<v Speaker 1>to return to roughly ten percent by the end of

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<v Speaker 1>the current period. Well, now we've got him here to

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<v Speaker 1>explain a little bit more. HPE CEO Antonio Niry. We

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<v Speaker 1>get into how you're building out this business, how Juniper

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<v Speaker 1>adds to the networking side, but for now, the AI systems,

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<v Speaker 1>this server unit, Howard, is profitability to improve.

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<v Speaker 2>Well, good morning calleran, thanks for having me. We are

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<v Speaker 2>very pleased with our quarter. It turned out to be

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<v Speaker 2>very solid with record breaking performance on revenue and we

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<v Speaker 2>expand the profitability sequentially. And to your around the service segment,

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<v Speaker 2>we deliver what we say we will do. But most importantly,

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<v Speaker 2>our traditional server business returning to a historical level. And

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<v Speaker 2>so when I think about you four, we're going to

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<v Speaker 2>see a return to approximately ten percent for the quarter

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<v Speaker 2>because of the momentum in traditional servers, which by the way,

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<v Speaker 2>group double digits here over here, and the balance of

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<v Speaker 2>AI mix between sovere and an enterprise which now represents

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<v Speaker 2>more than fifty percent of our orders compared to the

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<v Speaker 2>service providers.

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<v Speaker 1>So the AI serve a bit is that set to improve?

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<v Speaker 1>How well broadly is the AI system's profitability improving as

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<v Speaker 1>we see this monumental buildout of infrastructure.

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<v Speaker 2>Well, as I think about the AI servers, I think

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<v Speaker 2>it is important character to think about different customer types

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<v Speaker 2>and how we participate in each of the segments. Should

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<v Speaker 2>we think about the service providers and the hyperscals and

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<v Speaker 2>the model buildings where a lot of the capital expenses

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<v Speaker 2>are taking in place. To your point, we are now

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<v Speaker 2>going to lead with networking for AI. We are extremely

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<v Speaker 2>pleased we close the Juniper transaction. Junior is already a

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<v Speaker 2>reference in many of those buildouts, and that's where how

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<v Speaker 2>we're going to lead in that particular segment of the market.

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<v Speaker 2>And we're going to sell the server compute platforms with

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<v Speaker 2>our partner. What makes sense from a profitability perspective, But

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<v Speaker 2>what we saw in the last couple of quarters in

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<v Speaker 2>particular discorders sovereign and neo clouds and enterprise now represent

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<v Speaker 2>more than sixty percent of the market. There, we participate

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<v Speaker 2>in a slightly different approach which the market profile is different.

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<v Speaker 2>We lead with a rack scale integrated architecture for the

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<v Speaker 2>sovereign space, and we lead with an integrated solution for

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<v Speaker 2>enterprise enterprise group for the seventh consecutive quorder, and we

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<v Speaker 2>double the number of logos. And then in sovereign we

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<v Speaker 2>grew more than two hundred and fifty percent, and we

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<v Speaker 2>want some marquete deals in the Middle.

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<v Speaker 3>East, Antonio, that might be the answer. Actually, I study

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<v Speaker 3>the traditional server business and the storage business, and you're

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<v Speaker 3>doing better than your peers Dell NetApp. But why are

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<v Speaker 3>the dynamics better for you when you have these analogous

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<v Speaker 3>businesses with those other names I mentioned.

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<v Speaker 2>Is multiple things. At first, in the enterprise traditional server,

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<v Speaker 2>we see a refreshed cycle taking place for age infrastructure

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<v Speaker 2>with more richly configured servers. And we have two phenomenal

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<v Speaker 2>platforms which is hppro I and JEN eleven and Gene twelve.

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<v Speaker 2>We did a fantastic job in really hitting the sweet

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<v Speaker 2>spot to the market with better performance per core, lower

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<v Speaker 2>energy consumption, better security, quantum proof for them other and

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<v Speaker 2>through WORLDD optimization. And so now as we go to

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<v Speaker 2>the June twelve that AOP continues to growth and the

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<v Speaker 2>ability to attach services is much higher. As I go

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<v Speaker 2>to the storage business, we really transform the entire industry

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<v Speaker 2>in my mind by deploying a consistent architecture, whether it

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<v Speaker 2>is structural data block storage, or whether it's our structural

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<v Speaker 2>data which you need for AI. And that's what we

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<v Speaker 2>call the object data with file ingestion, so the customer

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<v Speaker 2>can do one one investment with a peace of mind

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<v Speaker 2>as they grow their data needs for AI. So I

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<v Speaker 2>think that's what's resonating in the market. Butten we have

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<v Speaker 2>a fantastic go to market. We play in one hundred

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<v Speaker 2>and seventy two countries and that reach together where the

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<v Speaker 2>partner is a major differentiation. In addition to the fact

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<v Speaker 2>that green Lake provides through AI dream and life cycle

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<v Speaker 2>management serviability.

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<v Speaker 3>Those are the things specific to you, Antony, would you

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<v Speaker 3>give me an outlook for enterprise IT spending And because

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<v Speaker 3>we have a lot of macro uncertainty right now, and

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<v Speaker 3>you must see in the pipeline how that uncertainty is

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<v Speaker 3>really manifesting.

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<v Speaker 2>I was based on our pipeline, first of all, is

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<v Speaker 2>solid across the three segments we participate in networking, server,

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<v Speaker 2>and hybrid cloud. It is uniform across the three geos.

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<v Speaker 2>There was another question in another interview that how North

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<v Speaker 2>America versus orders are doing. North America did very very

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<v Speaker 2>well for us this quarter, and so I think the

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<v Speaker 2>demand will continue to be there. Every enterprise have to

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<v Speaker 2>modernize and deploy AI. We as a company of deploying

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<v Speaker 2>very extensively. We see the productivity improvements across many functions

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<v Speaker 2>and many businesses, so that will continue. But at the

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<v Speaker 2>same time, there is a way to modernize the legacy

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<v Speaker 2>by freeing up space, power and cooling so you can

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<v Speaker 2>deploy this new technology. So we are very confident about

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<v Speaker 2>the outlook and with Juniper, that outlook becomes even stronger

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<v Speaker 2>because now we have a complete portfolio networking that makes

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<v Speaker 2>us unique as we want to build the best networking

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<v Speaker 2>business in a modern, secure, cloud, native and AI driven portfolio.

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<v Speaker 1>And you're expecting to cut costs. I think with seeing

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<v Speaker 1>six hundred million dollars in cost savings are expected by

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<v Speaker 1>that combination. Antonio cost savings are necessary for many businesses

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<v Speaker 1>right now, as you think about some of the pressure

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<v Speaker 1>from tariffs, your bird's eye perspective on how much that's

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<v Speaker 1>implicating your business.

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<v Speaker 2>Right now, you have to have a mindset of continuously

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<v Speaker 2>transform the company. That's a fact, and you know the

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<v Speaker 2>future belongs to the fastest said all the time. But

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<v Speaker 2>the at least six hundred million dollars in synergies is

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<v Speaker 2>related just to the Juniper transaction, and I re iterated

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<v Speaker 2>that yesterday, and then there is an incremental three hundred

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<v Speaker 2>and fifty million dollars through three key strategic levers. Continue

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<v Speaker 2>to optimize our portfolio, continue to optimize the workforce, and

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<v Speaker 2>aggressively deploy this set of technologies. Another quarter is not

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<v Speaker 2>just acustic out is a way to improve experiences and

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<v Speaker 2>become more efficient and agile in this market which you

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<v Speaker 2>have to react with in the moment. So we are

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<v Speaker 2>very encouraged about what we're seeing and Juniper actually give

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<v Speaker 2>us an opportunity to rethink some of the processes we

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<v Speaker 2>have had for a long time.

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<v Speaker 3>Here, Antonio, I ask you this every quarter, how is

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<v Speaker 3>the relationship in partnership with Nvidia? But is Jensen one?

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<v Speaker 3>We'd see it right for the supply chain and the partners.

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<v Speaker 3>They give great visibility to future iteration as a product right,

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<v Speaker 3>they commit to the annual cadence of new GPU. They're

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<v Speaker 3>increasingly involved in the networking through Envy Link. Is anything

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<v Speaker 3>changing for you because of the way that video operates

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<v Speaker 3>generationally technology to technology every year.

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<v Speaker 2>We have a fantastic strong partnership at the company level

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<v Speaker 2>and at the personal level. Jensen is available in the moment.

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<v Speaker 2>If I need something, he picks the phone and we chatted.

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<v Speaker 2>We solve it. But I will say the following I

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<v Speaker 2>think from a collaboration perspective, from a co engineering perspective.

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<v Speaker 2>The proof of that is our AI factor for enterprise

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<v Speaker 2>with a private cloud AI, we actually took a very

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<v Speaker 2>different approach together with a video We integrated the entire

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<v Speaker 2>Nvidia AI suite of software inside our green lay cloud.

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<v Speaker 2>We took a software down into infrastructure and together we

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<v Speaker 2>provide an integrated solution for our enterprise customers. That's a

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<v Speaker 2>testament how you co engineer despite the fact a lot

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<v Speaker 2>of the value is on the GPU, but reality is

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<v Speaker 2>the software and the experience that you deliver. On the

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<v Speaker 2>other hand, now with networking, we have another set of

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<v Speaker 2>opportunities because above the envy Link and the spectrum ACS

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<v Speaker 2>you refer to. You need a full data center architecture,

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<v Speaker 2>and Vidia does not participate into that. Our major competitors

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<v Speaker 2>obviously our Cisco and Arista, but Juriper has become the

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<v Speaker 2>reference for many of these large AI deployments. But I

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<v Speaker 2>do believe together with the Nvidia, we can do a

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<v Speaker 2>better job in the way we deploy that copex and

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<v Speaker 2>we run that infrastructure from an OPES perspective using AI

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<v Speaker 2>technologies for that matter, in food manage the network. So

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<v Speaker 2>we are very excited about that. And look, you know,

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<v Speaker 2>in the last quard we announced new innovation together with Nvidia,

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<v Speaker 2>the RTX six thousand pro, the latest Ultra you know Blackwell,

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<v Speaker 2>we are committed to be time to market with Jensen

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<v Speaker 2>and team.

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<v Speaker 1>I'm interested by the adoption and generator of AI by

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<v Speaker 1>the companies that are helping them become a reality. Of course,

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<v Speaker 1>benefits your share price, which is near a record high, Antonio,

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<v Speaker 1>But how is it benefiting your employees or indeed, how

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<v Speaker 1>are the pilot's running because there's been a lot of

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<v Speaker 1>questions about whether there's been efficacy there since the MIT report.

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<v Speaker 2>Yeah, I think it's fair to say Carol and from

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<v Speaker 2>generative AI to agent KI, and I think about agent

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<v Speaker 2>KI as the next evolution for what really enterprise needed.

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<v Speaker 2>And my view is that agent KI will transform business

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<v Speaker 2>processes by simplifying them, automating them and then bring intelligence

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<v Speaker 2>to it. In our company, we are using agent ki

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<v Speaker 2>aggressively in our offers. So Green Lake Intelligence, which we

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<v Speaker 2>announce it June, is one of the most comprehensive clouds

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<v Speaker 2>that includes a gent ki observability in the way deploy

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<v Speaker 2>and manage infrastructure and so forth. On the other hand,

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<v Speaker 2>as a company, we are deploying agent KI across finance.

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<v Speaker 2>Our CFO is incredible aggressive on this, so she is

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<v Speaker 2>on the leading edge on this. Our marketing team uses

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<v Speaker 2>for demand generation and the brand campaigns and targeting segments

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<v Speaker 2>where it makes sense, and our services team is used

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<v Speaker 2>to provide better support experiences in our supply chain. We

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<v Speaker 2>use it for forecasting and planning, and there is many

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<v Speaker 2>other examples of that. And so I think this generation

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<v Speaker 2>generative I now became agentic AI. In the future of

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<v Speaker 2>course will be the robotics part, but the productivity level

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<v Speaker 2>we've see in is pretty significant and we are not

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<v Speaker 2>put of a concept. We have deployed more than sixty

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<v Speaker 2>use cases across the company and we have more than

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<v Speaker 2>two hundred in testing as we speak. Some will fail,

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<v Speaker 2>Carolund and that's fine, and the mentality there needs to

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<v Speaker 2>be fell fast and improved and focus on our return

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<v Speaker 2>and investor capital.

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<v Speaker 3>Antonio, you've been CEO since the start of twenty eighteen.

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<v Speaker 3>Where does HPE sit today relative to your big vision

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<v Speaker 3>for what HPE is can or should be against your peers.

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<v Speaker 2>When I became CEO, I had a vision to be

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<v Speaker 2>at edge centric, cloud level and data driven company. We

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<v Speaker 2>invested at the edge was the Ruba acquisition and we

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<v Speaker 2>deliver tremendous value for our shaholders from seven hundred and

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<v Speaker 2>fifty million dollar revenue all the way to over five billion.

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<v Speaker 2>And obviously now the next move was the acquisition of

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<v Speaker 2>Juniper to make this company a networking centric company, because

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<v Speaker 2>I believe the next AI era here is the convergence

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<v Speaker 2>of networking cloud. And then obviously the business process that

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<v Speaker 2>we will run as an enterprise, and that to me

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<v Speaker 2>is the core foundation that have been envisioned for our

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<v Speaker 2>company going forward, and on our core foundation, we deliver

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<v Speaker 2>the best cloud and AI experiences so is continued to

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<v Speaker 2>be shaped. I'm very pleased with the progress, but let's

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<v Speaker 2>not forget it's not just the division itself. It's how

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<v Speaker 2>you execute with a culture, and I said the values

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<v Speaker 2>that makes us unique. And HP has been recognized also

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<v Speaker 2>along the way as one of the best places to

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<v Speaker 2>come and work by many surveys and magazines and institutions.

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<v Speaker 2>So my view is that we are are shipping the future,

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<v Speaker 2>but ultimately is about delivering showholder value and we are

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<v Speaker 2>going to be positioned for the next three years to

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<v Speaker 2>accelerate that value. As you see today because our stock

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<v Speaker 2>price still undervalue intermal multiples. Our goal is to deliver

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<v Speaker 2>the value accelerated for our shareholders and be relevant to

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<v Speaker 2>our customers in this new environment we live in.

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<v Speaker 3>I should have just asked you if your stock price

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<v Speaker 3>is undervalued. Antonni ANDERI President and CEO of HPE. Will

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<v Speaker 3>leave it there, but a really robust conversation, Thank you

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<v Speaker 3>very much,