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HP Inc. and HP Enterprise: What’s Next

Both HP Inc. and HP Enterprise announced quarterly results this week. The surprising twist: HP Inc. (the PC and printer maker) in many ways is performing better than HP Enterprise (the network, storage and server specialist). So what’s next for the twin hardware giants? Here’s a preview.

Stephanie Dismore

Stephanie Dismore

Dion Weisler

Dion Weisler

Conventional wisdom says HP Inc. will continually struggle with falling revenues because the PC market is so yesterday, forever overshadowed by mobile devices and apps linked to the cloud. But HP’s Q1 2017 revenues actually rose 3.7 percent to $12.7 billion — and PC revenues were up a stellar 10 percent during the quarter. Yes indeed: Double-digit PC revenue growth. What decade is it?

“As a more nimble company, we’ve been able to accelerate our strategy, and we’re now firing on all cylinders,” said HP CEO Dion Weisler during the company’s earnings call this week. “With a strong start to our 2017 fiscal year, we continued to build on our track record of delivering on all of our financial commitments with discipline, focus, and execution. We’ve also made solid progress in positioning the business for long-term growth, and we accomplished this amidst a market backdrop that remained highly competitive.”

Weisler pointed to positive channel buzz about the company’s R&D and pending Samsung printer business acquisition. “The reception has been broadly positive on a number of dimensions, firstly off the back of our own home-grown innovation with the PageWide array and the ability to take that into the A3 line of products,” he said. “But in addition to that, obviously the line that we’re initially OEM-ing from Samsung but then once we complete the Samsung acquisition by the end of this year, we’ll round out the portfolio.

HP’s execution includes closely managing channel inventors, added HP Inc. CFO Catherine Lesjak. And no doubt, Channel Chief Stephanie Dismore deserves credit for balancing the company’s consumer and commercial partner strategies.

HP Enterprise: Cloud Squeezes Infrastructure

Meanwhile, HP Enterprise delivered disappointing earnings and a disappointing revenue forecast. In its latest quarter, HPE revenues fell 10.4 percent — about $670 million worse than analysts had been expecting.

Meg Whitman HPE CEO

Meg Whitman

HPE CEO Meg Whitman blamed the shortfall on multiple factors, including management changes that will take time to gel, along with pressure from cloud computing. The recent changes include a new global head of sales and new sales leads in each HPE geographical region; a new leader for the Technology Services business; and a new leader for the company’s channel program.

“While these changes were the right changes to make, it was a lot for the organization to take in,” Whitman conceded during an earnings call yesterday. “Frankly, as we headed into Q1, we overloaded many of our top people and disrupted the day-to-day cadence of our business more than we should have. The good news is that we’ve identified the problem and are fixing it. More importantly, once the dust settles, the changes we’ve made will leave HPE in a much better position to compete and win.”

No doubt, help is on the way — particularly as HPE ramps up the recently acquired SimpliVity business. That deal pushes HPE and its channel partners deeper into the hyperconverged infrastructure (HCI) market. With SimpliVity and HCI solutions, HPE channel partners should be well-positioned for data center refresh projects.

Hyperconverged Infrastructure (HCI) vs. Public Cloud Services

The problem: Some of those data center refreshes will never happen. Instead, many customers are opting to move existing and new workloads to the cloud, where Microsoft Azure and Amazon Web Services remain in rapid growth mode.

Simply put, HPE remains too dependent on hardware sales at a time when customers increasingly want OpEx software solutions built on public clouds.

Still, Whitman has worked plenty of magic in recent years. First, she stabilized the former Hewlett Packard Company. Then, she broke up the businesses to make them more nimble. Now, HPE is busy shedding some software assets (in a deal with Micro Focus) and IT consulting assets (in a deal with CSC to create DXC Technology).

Next up: Whitman needs to find more recurring revenue opportunities for HPE… and its channel partners.

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