HPE GreenLake Momentum On Rise With ‘Largest Quarter Ever’

‘We have talked about the need to drive to a consumption business strategy and the partners are getting on board,’ says HPE CEO Antonio Neri.

Hewlett Packard Enterprise CEO Antonio Neri said the company’s GreenLake pay-per-use model, which provides a public cloud consumption experience on-premise, had its “largest quarter ever” with a robust 39 percent sales growth.

“We have talked about the need to drive to a consumption business strategy and the partners are getting on board,” said Neri in an interview with CRN after the company’s second quarter earnings call. “They all realize that for them to be relevant in front of customers in a hybrid cloud environment, they need to provide a consumption driven offering. For us it is important that we continue to drive that momentum.”

The book to bill ratio for HPE’s Pointnext services business – a leading indicator of HPE GreenLake future sales growth – accelerated both year over year and from the preceding quarter, said Neri.

“Our ability to offer all our technology as a service is a key differentiator for HPE,” said Neri. “We are the only company in the market that can provide a true consumption driven offering in a hybrid cloud environment. HPE GreenLake is a key element of our push toward subscription based revenue.”

Paul Cohen, vice president of sales for New York-based PKA Technologies Inc., one of HPE's top Platinum partners, said the GreenLake model is resonating with customers.

“Customers love the GreenLake model and the flexibility it provides them,” said Cohen. “Our GreenLake sales pipeline is growing. Over time it is going to have a huge impact as we get this down to a science and turn quotes around quicker for customers. GreenLake is a big differentiator for us.”

As part of the GreenLake sales charge, Cohen said he is seeing a renewed support drive from HPE Pointnext with strong leadership from HPE Pointnext Vice President of Delivery North America Simon Creasey. “We are seeing a big difference in the field with his focus on the channel,” said Cohen.”We really appreciate that.”

That Pointnext field support is going to be critical to driving GreenLake sales, said Cohen.

The GreenLake sales growth was one of the highlights for the quarter in which HPE reported non GAAP diluted net earnings per share of 42 cents per share, six cents higher than the Wall Street consensus, on sales of $7.2 billion, down from the Wall Street consensus of $7.4 billion.

Neri said the channel delivered the “best” performance of any route to market in the quarter. Among the strong areas of growth for HPE were: composable cloud which was up 78 percent; hyperconverged which was up 25 percent; and storage which was up five percent.

Those high growth areas, however, were offset, Neri said, by “unexpected market dynamics” which included extended sales cycles that pushed some sales into HPE’s third fiscal quarter. “We saw extended sales cycles which indicates a slightly softer demand environment from what we saw earlier in the quarter,” he said.

What’s more, Neri said, HPE experienced “execution” issues in its Intelligent Edge business which reported sales of $666 million, down six percent from the $706 million in the year ago quarter.

“We uncovered some uneven execution in North America, mainly driven by our current sales coverage model which we are actively addressing,” said Neri. “From a market perspective we experienced some deals not closing in the timeframe we anticipated.”

Neri said HPE is shifting resources to address the transition to Aruba’s WiFi 6 – which delivers higher speed WiFi performance. “We have to make some quick adjustments on how we cover those markets where the growth is,” he said. “At the core of this is nothing more than making sure our resources covering the market are aligned with where the growth is.”

In fact, Neri said he expects Aruba’s new WiFi 6 internet of things (IoT) ready access points along with new Aruba product introductions later this year to “contribute to growth” in the Intelligent Edge business long term.

The Intelligent Edge business was also hit by customers concerned about global trade macroeconomic issues which impacted a “few” deals that shifted from the second quarter to the third quarter, said Neri.

In the Hyrid IT infrastructure business, HPE reported sales of $5.6 billion, down four percent from $4.17 billion in the year ago quarter.

Sales of HPE’s higher margin “value compute” portfolio, however, were up eight percent when adjusted for currency. That helped drive an operating margin of 11.4 percent in the Hybrid IT business, up 140 basis points from the year ago quarter.

Cohen, for his part, said his company’s HPE sales for the quarter were up more than 20 percent with robust growth in the value compute business.

Cohen credited Neri with driving a wave of innovation that includes HPE’s InfoSight predictive analytics platform which is helping to spark enterprise sales growth.

“We see the innovation and there is a different attitude with the sales and support teams,” said Cohen. “Antonio is making a difference in the culture. (Former HPE CEO) Meg (Whitman) was the right person for the time. But Antonio is taking it to another level from an innovation, technology and support perspective.”