HP CEO Whitman: HP Enterprise Is Rounding The Corner, Sales Growth In Sight

Hewlett-Packard CEO Meg Whitman on Thursday told Wall Street analysts that she sees sales growth in sight for Hewlett Packard Enterprise as it prepares to become an independent company Nov. 1.

"We are now rounding the corner where the growing businesses are bigger than the declining businesses, which is actually going to lead to growth," said Whitman discussing the enterprise business outlook. "Boy, it has taken a while to get here, but we are here and I think that sets Hewlett Packard Enterprise up pretty well as we think about growth going forward."

Among the Enterprise Group highlights as HP posted better-than-expected results for its third fiscal quarter ended July 31: 7 percent growth in storage in constant currency with a whopping 400 percent growth in all flash storage; 15 percent sales growth in constant currency in industry-standard servers; and 28 percent growth in the networking business bolstered by HP's $3 billion acquisition of Aruba Networks on May 19.

[Related: HP Posts Greater-Than-Expected Q3 Results, On Track With Biggest IT Split Ever]

HP reported earnings per share after charges of 88 cents on sales of $25.3 billion for the third quarter. The Wall Street consensus was diluted net earnings of 85 cents per share on an 8 percent decline in sales, to $25.4 billion.

Commenting specifically on the storage business, HP CFO Cathie Lesjak said that converged storage business grew 18 percent on a constant currency basis and now accounts for more than 50 percent of the storage business. "You should see pretty significant opportunity for growth [there]," she said.

Whitman, for her part, said the HP Enterprise Group is seeing the benefits of the work that has been done to "strengthen" the product and go to market strategy over the past four years. She said HP saw "good momentum" in the quarter in servers, storage, networking and even sounded a positive note on HP's $22.3 billion Enterprise Services business.

"In Enterprise Services, we are turning the corner in what has been one of the most critical parts of the turnaround," she said. "ES significantly improved its sequential revenue trajectory and delivered another quarter of sequential and year-over-year profit improvement."

Whitman said HP Enterprise is approaching the Nov. 1 split with "partner and customer confidence at an all-time high" as it gets set to move into the fifth year of her five-year turnaround plan. One of the biggest factors in the turnaround is a well-defined, well-honed go-to-market strategy that has remained constant over the past four years and is now starting to pay off, she said.

Before Whitman took the helm, HP had been battered by a constantly changing go-to-market strategy, dictated by a revolving door of CEOs. "Every CEO had a different idea about how to go to market," she said. "We just locked on one and we are driving it. There might be things that we could do to optimize, but we have got a strategy and we are driving it. That has given the sales force and customers a lot of confidence."

That confidence was almost certainly boosted by what was by all accounts a complex IT system cutover Aug. 1 into two separate $55 billion independent Fortune 50 companies -- Hewlett Packard Enterprise and HP Inc. -- that went off without any major issues in what appears to be one of the biggest business split in IT history.

Whitman praised the HP team overseeing the Aug. 1 split in IT systems, which was involved in separating some 750 systems affecting 95 percent of HP's $110 billion business. "After shutting down for just three days to transition critical operational systems across our business segments, we are now live globally," she said. "Customer orders are flowing through, manufacturing and shipments are in transit across our entire supply-chain network. This was a huge accomplishment."

Kris Rogers, senior vice president of partner and product management at PCM, a $1.5 billion El Segundo, Calif.-based solution provider that counts HP as its largest vendor partner and does business with both Hewlett Packard Enterprise and HP Inc., said the HP cutover was flawless.

"As I told someone at HP, if I didn't know it was happening, I wouldn't have known it happened," she said. "There were no fiery emails or war conference rooms. I know it must be disappointing to HP's competitors, but it has been pretty much business as usual."

Rogers said she is more "bullish" than ever on the prospects for both Hewlett Packard Enterprise and HP Inc. with the split. She sees both companies moving faster and driving more product innovation as separate companies. "We see nothing but green lights down the boulevard going forward," she said.

PUBLISHED AUG. 20, 2015