Five HPE earnings takeaways

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Five HPE earnings takeaways
Antonio Neri, HPE

Hewlett Packard Enterprise worldwide channel chief George Hope told partners that the channel business was up three per cent overall to US$3.7 billion in HPE’s third fiscal quarter ended July 31 with a record-breaking 55 per cent growth in the GreenLake cloud services platform.

“We’re growing in every dimension and we are making progress both year over year and sequentially,” said Hope in a quarterly earnings channel review for partners that he hosted alongside HPE chief executive Antonio Neri.

“We have kind of had an indirect perfect storm if you will,” Hope said.

HPE’s intelligent edge business which includes its Aruba wireless networking business, was up 10 per cent year over year in the channel to US$833 million.

The channel accounts for 91 per cent of the Aruba business.

HPE’s storage business through the channel, meanwhile, was up seven per cent year over year, while the compute business was up two per cent year over year for partners, Hope said.

With overall product mix taken into account, HPE’s channel business accounts for 69 per cent of sales.

With supply chain issues remaining unchanged, new orders during the quarter exceeded expectations, pushing HPE’s sales backlog to yet another record level.

That backlog is up 96 per cent year over year.

“What I am really pleased about is what I said during the (earnings) call is the fact that we continue to see enduring demand,” Neri told partners.

“That is particularly true in many areas of the portfolio because of our unique differentiated value proposition whether it is the edge or GreenLake,” he added.

Overall, HPE reported non-GAAP earnings per share of 48 cents on sales of US$7 billion, up four per cent when adjusted for currency impact.

That compares with non-GAAP earnings of 47 cents per share on sales of US$6.89 billion in the year-ago quarter.

HPE expanded gross margins by half a point sequentially during the quarter, with non-GAAP gross margin of 34.7 per cent, up 50 basis points sequentially, matching the highest gross margin the company has delivered since it began it as a service sales offensive in 2019.

Here are the five biggest channel takeaways from HPE’s third fiscal quarter ended July 31.


HPE GreenLake: a record quarter

GreenLake orders through the channel were up 55 per cent in the quarter compared with the overall GreenLake orders of 39 per cent.

“We are seeing a lot of (GreenLake) momentum from our partners,” said Hope.

The record-breaking quarter marks the 21st consecutive quarter of GreenLake growth with the greatest number of partners ever doing GreenLake transactions.

In fact, the number of partners doing GreenLake transactions was up 75 per cent from a year ago.

The number of partners that sold more than one GreenLake deal doubled year over year, Hope said.

What’s more, the number of partners selling their third GreenLake deal tripled, he said.

“We’re starting to see those numbers (of partners doing multiple GreenLake deals) starting to move, that is a huge testament to GreenLake getting baked into the offerings of a lot of our partners,” he said.

Systems integrators working closely with HPE through the managed programme grew their GreenLake business 13 per cent year over, Hope said.

Approximately 30 per cent of those managed systems integrator’s business now comes from GreenLake, he said.

“There is a super steep adoption curve there,” he said.

GreenLake sales through distribution also saw an uptick with 12 per cent more partners participating in the most recent quarter compared with the preceding quarter.

In addition, the number of GreenLake projects that distributors are working with partners on are up 13 per cent.

HPE also had a record quarter for GreenLake partner acceleration workshops aimed at teaching partners how to transform to a cloud services business outcome sales model.

The record GreenLake channel performance in the quarter came as HPE doubled the number of net-new logo wins, driving an annualised revenue run rate of US$858 million, up 22 per cent from the prior year.

HPE’s total as a service orders are up 86 per cent year to date.


Intelligent edge growth

HPE’s intelligent edge business in the channel was up 10 per cent in the quarter to US$833 million with robust demand with Silver Peak posting a “phenomenal” 36 per cent growth through the channel in the quarter, said Hope.

Intelligent edge as a service annualised revenue run rate was up more than 60 per cent from the year ago period.

There are now more than 120,000 Aruba users on the GreenLake platform.

Overall, the intelligent edge business was up eight per cent from the year ago period to US$941 million with a 16.5 per cent operating margin.

With supply chain issues continuing to impact Aruba, the Aruba backlog hit 20 times historical levels.

Among the biggest Aruba wins in the quarter: creating a secure network to support thousands of athletes and staff and 4,400 athletes at the Birmingham Commonwealth Games in the United Kingdom.

HPE Channel Chief George Hope
HPE channel chief George Hope

HPE partners deliver storage and compute growth

The storage business through the channel was up seven per cent year over year with the compute business up two per cent through partners even with supply chain constraints.

HPE’s storage business also posted a 12 per cent year over year growth through distribution, Hope said.

HPE’s most innovative storage offerings, HPE Alletra and Nimble, showed ‘very strong” continued growth and order momentum through subscription offerings, he said.

HPE’s midmarket SMB storage growth was also strong in the non transactional market up 27 per cent sequentially, Hope said.

In the compute business, HPE ended the quarter with order backlog hitting a record five times normal levels.

The most “important metric” in that compute business was the 13.3 per cent operating margin for the business, said Neri.

That compares with Dell’s operating income of 11 per cent for its entire Infrastructure Solutions Group (ISG).

“Clearly we and Dell are managing this business 180 degrees opposite,” said Neri.

“For us it is a belief to grow profitably; for them it is just a matter of revenue.”


HPE block storage as a service, a ‘massive’ opportunity

HPE’s new GreenLake block storage-as-a-service which it refers to as the industry’s “first” block storage-as-a-service offering is a massive opportunity for partners as it rolls out across the world, said Hope.

The block storage-as-a-service provides the ability for partners and customers to self-provision storage through a SaaS platform with 100 per cent availability guaranteed.

The block storage as a service is not a fully managed offering like GreenLake, opening the door for partners to provide a wide range of services including assessment services, installation services, site inspection services, and managed services.

“There is a significant opportunity for you as partner to layer in your capabilities,” said Hope.

HPE’s backup and recovery service and ransomware protection from Zerto are critical storage service opportunities, said Hope.


The HPE financial services opportunity

With GreenLake channel momentum on the rise, HPE Financial Services’ ability to help drive transformation for partners and customers is a huge competitive advantage for them, Hope said.

Overall, HPE Financial Services volume increased four per cent year over year in the quarter in constant currency with strong performance in GreenLake deals.

HPE Financial Services’ “ability to provide capital for partners to invest in their transformation is pretty incredible and unmatched,” said Hope. “We want you to continue focus on looking for those opportunities.”

The companies partners are in fact finding success with GreenLake by tapping into HPE Financial Services to buy back stagnant or older IT assets to fund a digital transformation.

The total number of HPE Financial Services customers supported by channel partners was up nearly eight per cent year in the most recent quarter, said Hope.

“They have seen significant growth with our Platinum, Gold and Silver partners up 14 per cent year over year,” he said.

“Continue to leverage them for that digital transformation,” Hope concluded.



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