Hewlett Packard Enterprise chief executive Meg Whitman told Wall Street analysts on Wednesday that the new slimmed-down US$28 billion enterprise-focused HPE has a decided advantage in the next-generation infrastructure battle against Dell and Cisco.
Whitman said Dell lacks HPE's innovation engine and networking muscle, while Cisco lacks the critical storage assets necessary to win in a hyper-converged infrastructure market. "I think we are in a great position to compete with both Cisco and Dell," said Whitman.
The new HPE – minus the spin-off mergers of its non-core software business with Micro Focus and its Enterprise Services merger with CSC – is roughly the size of Dell's enterprise business, but is "more focused with better innovation", said Whitman.
Whitman's comments came on the same day that Dell completed the US$58 billion acquisition of storage market leader EMC in the largest acquisition in IT history, creating a US$70 billion behemoth with products that go from the desktop to the data center.
"We are getting smaller, while Dell is getting bigger, and this is important because I believe speed and agility is important in innovation and go-to-market," said Whitman. "They are levering up and we are delivering. We have US$5.3 billion of net cash on the operating company and we are going to have a lot more by the time we are done with these [spin-off merger] transactions."
HPE is ready to use that cash to do complementary acquisitions that will fuel further innovation for HPE, said Whitman, who has painted a dark picture of the US$60 billion debt burden Dell is taking on to complete the EMC acquisition.
"What [Dell] is doing is doubling down on old technology in a cost take-out play," she said. "That might be quite successful for the leadership team from a financial perspective. I am not so sure it is good for customers."
Cisco, meanwhile, is missing the storage assets needed to win in the current hyperconverged market where storage, compute and networking assets are critical to success, said Whitman.
One sign of HPE's success against Cisco is 20 percent growth in the Aruba wireless networking business above the HPE internal plan in the most recent quarter. "Aruba at the edge is killing it – a 20 percent growth rate above our internal plan," said Whitman. "We are just winning deals hand over fist there. We feel really good about our ability to compete against Cisco."
HPE, which spun off from HP Inc last November, announced its second major spin-off merger Wednesday, selling its non-core software assets, including the Autonomy and Vertica big data software and its security software portfolio, to British multinational software maker Micro Focus in an US$8.8 billion deal.
Under the terms of the deal, HPE will spin off its non-core software assets for US$2.5 billion plus a 50.1 percent stake in the new company, including big data, enterprise security, application delivery management, IT governance and IT operations management for US$2.5 billion plus a 50.1 percent stake in the new company.
Whitman said the spin-off merger sets up HPE as the leading provider of hybrid IT with secure, next-generation software-defined infrastructure for data centers that bridge to multicloud envirionments and intelligent edge to power campus, branch and internet of things applications. "We believe this is what our customers are looking for and what we are best qualified to do," she said.
Once the Micro Focus and CSC Enterprise Services spin-off mergers are completed, the new HPE will have "significant scale, a diversified world-class portfolio and a global footprint to meet the evolving needs of our customers and partners", said Whitman. "We will be a market leader both in the data centre and on the edge with our world-class portfolio of software-defined servers, storage, networking and converged infrastructure."
The new HPE will also have robust recurring revenue streams that account for 60 percent of its operating profit powered by the technology services business, which will account for about 25 percent of the business once the spin-off mergers are completed.
HPE shareholders have benefited greatly since the split from HP Inc. with a whopping US$10 billion increase in HPE market capitalisation, a 40 percent increase since the split.
HPE shares closed Wednesday up 23 cents to US$22.09 just before reporting third-quarter results. In after-hours trading, HP shares were down 11 cents to US$21.98.
For its third fiscal quarter ended July 31, HPE reported GAAP diluted net earnings of US$1.32, up from 13 cents in the year-ago quarter, on a 6 percent decline in sales to US$12.2 billion.
"While there is more work to do, we are already seeing that our strategy is working," said Whitman. "As a more focused organisation, we have been better able to allocate resources more effectively and introduce truly best-in-class solutions."