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HPE CEO Concedes x86 Server Business Needs Channel Fixes

HP Enterprise‘s core Industry Standard Server (ISS) business is experiencing some “deterioration” because of cloud services and execution issues in the IT channel, CEO Meg Whitman conceded on an earnings call on Tuesday.

“We need to shore up [the] core ISS rack [business] with improvements in the channel, improvements in quote to cash, and focus,” said Whitman. “We need to be more focused on the distributors and VARs for the volume-related ISS rack business.” Later during the call, she added, “I think we are not executing as well as we could and we aim to fix that.”

Whitman was quick to draw a line between the ISS server business and higher-margin offerings like hyperconverged data centers. Multiple times during the call, she mentioned hyperconverged as a growth opportunity while ISS is more of a high-volume, pure channel play.

The statements come only a week or so after Cisco Systems confirmed weak hardware sales amid an IT services provider spending slowdown.

Falling HPE Hardware Sales

In its Q4 results announced Tuesday, server revenue was down 7%, storage revenue dropped 5%, networking revenue was down 34% (though it was flat when adjusted for divestitures and currency), and Technology Services revenue was down 4%.

HPE’s overall revenues for Q4 were $12.5 billion, down 7% from the prior-year period. The company remains in transition mode, spinning off but retaining an ownership stake in various software and IT consulting assets.

Critics believe HPE remains far too dependent on traditional hardware sales. But the company has recently launched well-received partner program updates. HPE also is in the market for potential software acquisitions, and the company is building managed services offerings for Microsoft Azure — though it’s unclear if those MSP offerings will be productized for partners.

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