WEBVTT - HPE CEO Antonio Neri Talks HPE Shares Trading

0:00:02.360 --> 0:00:07.160
<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

0:00:06.960 --> 0:00:10.760
<v Speaker 2>Luckily joining us to discuss is Hewlett Packard Enterprise CEO

0:00:11.119 --> 0:00:17.520
<v Speaker 2>Antonio Neerry. I look at HPE and the stock performance,

0:00:17.720 --> 0:00:21.920
<v Speaker 2>and you're not getting the credit that Dell is or

0:00:21.960 --> 0:00:25.759
<v Speaker 2>super Micro. I see Jensen one pat Michael Dell on

0:00:25.800 --> 0:00:29.080
<v Speaker 2>the back and say, if you need a scalable service solution,

0:00:29.560 --> 0:00:33.720
<v Speaker 2>you phone Michael Dell. But your margins are better. Are

0:00:33.720 --> 0:00:36.040
<v Speaker 2>you finally starting to get some credit for the role

0:00:36.080 --> 0:00:38.200
<v Speaker 2>you're playing in the AI infrastructure build out?

0:00:39.600 --> 0:00:42.440
<v Speaker 1>Well, good morning Ed Caroline. Great to be here with

0:00:42.479 --> 0:00:46.640
<v Speaker 1>you today. I completely agree with you that HP is

0:00:46.680 --> 0:00:50.239
<v Speaker 1>not getting the do credit for the potential of what

0:00:50.320 --> 0:00:53.519
<v Speaker 1>we do for AI and the results we have been delivering,

0:00:53.520 --> 0:00:55.040
<v Speaker 1>including this past quarter.

0:00:55.760 --> 0:00:56.400
<v Speaker 3>So when we.

0:00:56.400 --> 0:01:01.080
<v Speaker 1>Think about our quarters, number one one, we beat revenue

0:01:01.200 --> 0:01:04.760
<v Speaker 1>and we beat EPs, non appps and that was all

0:01:04.840 --> 0:01:07.680
<v Speaker 1>driven by the I system revenue conversion. To your point,

0:01:07.720 --> 0:01:10.560
<v Speaker 1>Karaba made almost a billion dollar a week seed the

0:01:10.640 --> 0:01:14.520
<v Speaker 1>nine hundred million dollars and we have a terrific pipeline which.

0:01:14.319 --> 0:01:17.160
<v Speaker 3>Is a multiple multiples of the current backlog.

0:01:17.720 --> 0:01:20.240
<v Speaker 1>And now we start seeing the uptick in enterprise, which

0:01:20.280 --> 0:01:24.080
<v Speaker 1>obviously HP has a significant presence. But the reality is

0:01:24.120 --> 0:01:26.520
<v Speaker 1>that we have unique capabilities. When I think about the

0:01:26.560 --> 0:01:32.119
<v Speaker 1>capabilities HP has in this particular inflection point AI number one,

0:01:32.200 --> 0:01:34.920
<v Speaker 1>we now have to run AI a scale we have

0:01:35.000 --> 0:01:37.160
<v Speaker 1>done it for decades, has been more than a supercomputer

0:01:37.200 --> 0:01:39.640
<v Speaker 1>now in the generative AI and that comes on the

0:01:39.680 --> 0:01:44.600
<v Speaker 1>back of our unique expertise in IP intellectual property, so

0:01:44.760 --> 0:01:47.560
<v Speaker 1>we know how to build these systems, have to cool it,

0:01:48.040 --> 0:01:51.800
<v Speaker 1>and then we have a unique manufacturing footprint for water cooling.

0:01:52.280 --> 0:01:53.360
<v Speaker 3>As we think about.

0:01:53.120 --> 0:01:56.400
<v Speaker 1>The next generation of silicon will require one hundred percent

0:01:56.440 --> 0:01:59.160
<v Speaker 1>of really cooling and HP is one of those companies

0:01:59.200 --> 0:01:59.960
<v Speaker 1>can do it at all.

0:02:00.400 --> 0:02:02.600
<v Speaker 3>And their last panel list is the services piece.

0:02:02.640 --> 0:02:06.160
<v Speaker 1>And when you talk about profitability of AI, we think

0:02:06.200 --> 0:02:09.240
<v Speaker 1>about as a complete pull through. It is not just

0:02:09.320 --> 0:02:11.799
<v Speaker 1>the infrastructure side, is also.

0:02:11.600 --> 0:02:12.639
<v Speaker 3>The services side.

0:02:12.680 --> 0:02:16.720
<v Speaker 1>And we had a very solid margin performance in our

0:02:16.800 --> 0:02:20.320
<v Speaker 1>AI systems, which is part of the server segment, where

0:02:20.360 --> 0:02:23.520
<v Speaker 1>we deliver eighteen percent growth year over year and we

0:02:23.600 --> 0:02:27.200
<v Speaker 1>deliver an eleven percent operating profit in the guidance we

0:02:27.280 --> 0:02:28.520
<v Speaker 1>provide eleven to thirteen.

0:02:28.880 --> 0:02:33.440
<v Speaker 4>Your CFO talking about prudent cost discipline, is that what

0:02:33.639 --> 0:02:37.520
<v Speaker 4>helps with the margin as well, Antonio, because look, let's

0:02:37.560 --> 0:02:40.040
<v Speaker 4>call out JP Morgan, the analyst over there this morning

0:02:40.120 --> 0:02:44.000
<v Speaker 4>saying the results in the outlook echoed similar AI server

0:02:44.120 --> 0:02:47.919
<v Speaker 4>story of revenue with limited margins. They're not hearing you

0:02:48.040 --> 0:02:50.520
<v Speaker 4>on the fat that you've got stronger margins.

0:02:51.080 --> 0:02:54.280
<v Speaker 1>I think it's a combination of three unique things, Caroline.

0:02:54.360 --> 0:02:59.880
<v Speaker 1>Number one is prudent business discipline. We have been, you know,

0:03:00.080 --> 0:03:03.160
<v Speaker 1>on that journey for our own time. We pursue deals

0:03:03.160 --> 0:03:06.680
<v Speaker 1>that we can add value, that we see path to profitability,

0:03:06.800 --> 0:03:08.240
<v Speaker 1>and that we can drive pull through.

0:03:08.680 --> 0:03:12.240
<v Speaker 3>That's number one. Number two is our complete portfolio.

0:03:12.720 --> 0:03:14.960
<v Speaker 1>And so one of the key areas that I think

0:03:15.000 --> 0:03:17.280
<v Speaker 1>the market doesn't understand is that we don't.

0:03:16.960 --> 0:03:18.280
<v Speaker 3>Just ship servers.

0:03:18.560 --> 0:03:21.800
<v Speaker 1>We actually ship the server we installed, and in many

0:03:21.880 --> 0:03:24.520
<v Speaker 1>cases we run it as a part of our hPG

0:03:24.520 --> 0:03:28.640
<v Speaker 1>green Lake platform and that includes an enormous amount of services.

0:03:28.680 --> 0:03:31.960
<v Speaker 1>That's why you see HP green Lake also growing rapidly

0:03:32.440 --> 0:03:35.040
<v Speaker 1>and the fastest growing area of HP green Lake this

0:03:35.200 --> 0:03:37.760
<v Speaker 1>pass quort, which grew thirty nine percent year over yere

0:03:38.400 --> 0:03:42.440
<v Speaker 1>is actually AI. And last panel list is our ongoing

0:03:43.040 --> 0:03:46.280
<v Speaker 1>brutal management or cost across the company. And also we

0:03:46.280 --> 0:03:48.280
<v Speaker 1>are now deploying AI in our own company.

0:03:49.040 --> 0:03:52.840
<v Speaker 4>Ah, that's interesting. So you're deploying within your company geners fae,

0:03:52.960 --> 0:03:56.360
<v Speaker 4>I'm sure, but who's coming to you? Who are the clients,

0:03:56.400 --> 0:03:59.280
<v Speaker 4>because I'm actually surprised that where else have you been

0:03:59.280 --> 0:04:00.880
<v Speaker 4>focusing if it's not enterprise.

0:04:02.280 --> 0:04:02.800
<v Speaker 3>Well there is.

0:04:03.040 --> 0:04:06.400
<v Speaker 1>I think about AI and three unique segments. Number one,

0:04:06.480 --> 0:04:09.360
<v Speaker 1>obviously is what I call the model builders. These are

0:04:09.360 --> 0:04:11.320
<v Speaker 1>the people who are building the models and need an

0:04:11.440 --> 0:04:14.440
<v Speaker 1>enormous amount of acceleraty the compute to train the models

0:04:14.760 --> 0:04:17.919
<v Speaker 1>from hundreds of billions of parameters to now obviously a

0:04:18.000 --> 0:04:22.520
<v Speaker 1>trillion plus parameters. And in that we also mentioned yesterday

0:04:22.600 --> 0:04:27.400
<v Speaker 1>that Microsoft is extending the Azure AI cloud to HB

0:04:27.520 --> 0:04:30.640
<v Speaker 1>infrastructure and to serve the clients. And one of the

0:04:30.640 --> 0:04:33.120
<v Speaker 1>clients just happened to be Open AI. So that's a

0:04:33.160 --> 0:04:36.200
<v Speaker 1>great example of it. But there's also other service providers

0:04:36.240 --> 0:04:39.560
<v Speaker 1>like Scale, Weil in France and many others we support.

0:04:39.960 --> 0:04:42.919
<v Speaker 1>That's one segment, and obviously that's what a lot of

0:04:42.920 --> 0:04:46.440
<v Speaker 1>the demand has been. The second segment, which is growing now,

0:04:46.640 --> 0:04:48.200
<v Speaker 1>is actually sovereign cloud, and the.

0:04:48.160 --> 0:04:49.160
<v Speaker 3>Third is enterprise.

0:04:50.880 --> 0:04:55.040
<v Speaker 2>Antonio, there is an interesting tension happening in your industry

0:04:55.279 --> 0:04:58.440
<v Speaker 2>and with your partners you know, Lisa, Sue and AMD

0:04:58.640 --> 0:05:02.440
<v Speaker 2>and Jensen and Video have the GPUs and CPUs right,

0:05:02.440 --> 0:05:06.080
<v Speaker 2>but they want to be systems vendors and so in

0:05:06.120 --> 0:05:08.799
<v Speaker 2>the context of a server, there's not a lot left

0:05:08.839 --> 0:05:12.680
<v Speaker 2>over after that. But they don't have the experience in

0:05:12.760 --> 0:05:16.680
<v Speaker 2>the sales channels that you guys operate in. Business is

0:05:16.720 --> 0:05:21.400
<v Speaker 2>big and small enterprise. How are you able to convince

0:05:21.480 --> 0:05:24.960
<v Speaker 2>your investors that you can all grow together when you

0:05:25.040 --> 0:05:27.240
<v Speaker 2>know that your biggest partners on the tech side want

0:05:27.279 --> 0:05:28.760
<v Speaker 2>to do more stuff themselves.

0:05:30.080 --> 0:05:33.360
<v Speaker 1>Yeah, and we have obviously the kids of experience in

0:05:33.520 --> 0:05:33.960
<v Speaker 1>doing so.

0:05:34.839 --> 0:05:37.919
<v Speaker 3>I think it's a multiple things. Number one. Obviously, we

0:05:38.000 --> 0:05:38.440
<v Speaker 3>work with.

0:05:38.440 --> 0:05:42.359
<v Speaker 1>Them to make sure their IP with our IP deliberate

0:05:42.520 --> 0:05:46.279
<v Speaker 1>better experience and a better performance. And so we co

0:05:46.400 --> 0:05:48.880
<v Speaker 1>engineered a lot of things and going to see here

0:05:48.920 --> 0:05:52.159
<v Speaker 1>with Nvidia in particular, are the HP Discover in Las

0:05:52.240 --> 0:05:55.240
<v Speaker 1>Vegas an enormous amount of innovation. We'll bring it to

0:05:55.279 --> 0:05:58.120
<v Speaker 1>the market, so I hope you can join us and

0:05:58.480 --> 0:06:01.760
<v Speaker 1>take a look at that. So with AMD, obviously we

0:06:01.800 --> 0:06:04.680
<v Speaker 1>have long standing relationship. In fact, some of the large

0:06:04.720 --> 0:06:08.440
<v Speaker 1>supercomputers with the Department of Energy has been built together

0:06:08.560 --> 0:06:10.760
<v Speaker 1>with A and D. What we will bring is the

0:06:10.880 --> 0:06:15.159
<v Speaker 1>infrastructure expertise, so it's not just the silicon built and

0:06:15.200 --> 0:06:17.600
<v Speaker 1>a server and you and I we're chatting before the

0:06:17.600 --> 0:06:22.400
<v Speaker 1>calls actually about the whole infrastructure and in that now

0:06:22.440 --> 0:06:24.920
<v Speaker 1>we have unique ip when it comes down to air

0:06:24.960 --> 0:06:28.960
<v Speaker 1>cool mixed cooling and directly could cooling, that's very hard

0:06:28.960 --> 0:06:32.440
<v Speaker 1>to do. Second piece, you need the manufacturing.

0:06:31.760 --> 0:06:32.839
<v Speaker 3>Capability to do so.

0:06:33.040 --> 0:06:36.719
<v Speaker 1>HP today has one of the largest water cool manufacturing

0:06:36.760 --> 0:06:37.800
<v Speaker 1>food print in the world.

0:06:37.960 --> 0:06:40.240
<v Speaker 3>Okay, and as you follow the roadmap, that will be

0:06:40.279 --> 0:06:41.640
<v Speaker 3>necessary in last panel.

0:06:41.360 --> 0:06:44.800
<v Speaker 1>List obviously is the services piece because this system required

0:06:44.800 --> 0:06:47.640
<v Speaker 1>a lot of maintenance and a lot of kind of

0:06:47.720 --> 0:06:50.160
<v Speaker 1>TLC if you will, and HP knows how to.

0:06:50.120 --> 0:06:50.839
<v Speaker 3>Do that scale.

0:06:51.640 --> 0:06:54.240
<v Speaker 2>So Antonio Jensen one will be on stage with you

0:06:54.320 --> 0:06:56.200
<v Speaker 2>and he'll give you a public endorsement.

0:06:56.400 --> 0:06:56.920
<v Speaker 3>Is that right?

0:06:58.240 --> 0:07:00.840
<v Speaker 1>No, I think what's going to happen is Jensen and

0:07:00.880 --> 0:07:05.880
<v Speaker 1>I are super excited to announce solutions together that will

0:07:05.920 --> 0:07:10.040
<v Speaker 1>advance the adoption. This is amazing technology and obviously that's

0:07:10.080 --> 0:07:10.880
<v Speaker 1>where the two.

0:07:10.680 --> 0:07:11.800
<v Speaker 3>Companies come together.

0:07:12.680 --> 0:07:15.560
<v Speaker 1>But also doing a spectacular venue which will be at

0:07:15.560 --> 0:07:18.120
<v Speaker 1>the Sphere, and so the way we're going to showcase

0:07:18.160 --> 0:07:21.320
<v Speaker 1>all that innovation is going to be very engaging and

0:07:21.520 --> 0:07:23.160
<v Speaker 1>I think you know the first of a kount.

0:07:24.160 --> 0:07:26.600
<v Speaker 4>It's been spending some time in Las Vegas. Going again.

0:07:27.040 --> 0:07:29.440
<v Speaker 4>You're back on the Enterprise CEO, Antonio and Narry.

0:07:29.640 --> 0:07:30.880
<v Speaker 3>It's great to have you with us today.

0:07:31.040 --> 0:07:32.200
<v Speaker 4>Thanks for joining on the Earnings