Hewlett Packard Enterprise (HPE) has outlined its plans for its full-year 2018, indicating that it will shift its focus away from lower-margin business and focus more on high-margin solutions and services.
HPE's lower-margin business has hit the vendor's top and bottom line over recent quarters, particularly its tier one server business, which on multiple occasions has been blamed for hampering growth.
For its current financial year, HPE said it expects to record revenue growth of five per cent, but this prediction takes the tier one business out of the equation.
For its full-year 2018, HPE said it expects to report "modest" revenue growth, again discounting the troubled tier-one server business.
Speaking at an analysts meeting, HPE CEO Meg Whitman outlined the five-year turnaround plan HPE is in the middle off, insisting that splitting the company into HPE and HP Inc was the right decision.
"I can tell you without a doubt separating the company in two was absolutely the right thing to do for our customers, our partners, our employees and of course our investors," she said. "We've seen that in the financial markets reactions.
"In 2012 we embarked on a five-year journey to turn this company around and create better value for shareholders, customers and partners.
"The first step was to diagnose the problems and build a solid foundation for a turnaround. 2013 was all about fixing and rebuilding the business. We improved operations, drove better cash flow and repaired our balance sheet
"In FY14 we focused on recover and expansion. We stabilised our revenue trajectory, we reignited innovation across HP and further strengthened our leadership in key areas. Fy15 was about accelerating that progress. We continued to target investments in higher-margin areas and saw the opportunity to accelerate our business in key acquisitions like Aruba."
Whitman said that HPE is in the process of strengthening HPE through four key factors: Organic investment, in areas such as HPE Synergy; investment in partnerships; acquisitions of the likes of Nimble and SimpliVity; and portfolio optimisation, which saw its services and software business spun out into separate organisations.
Whitman put extra emphasis on HPE's relationships with other players in the market, saying that individual innovation in itself is not enough.
"In today's marketplace organic innovation will only take you so far and to be fast and first with our customers we have to combine our ideas with solutions that come from outside our walls," she said.
"Our partner ecosystem is the best in the industry and absolutely critical to our future.
"Partnerships our going to be critical and that's why we launched Pathfinder, our venture investment and partnership programme. We use our expertise to identify the best emerging start-ups and then we curate their innovation within our innovation which helps us deliver cutting-edge solutions to our customers with results they cannot find anywhere else."
HPE also provided more information on its ‘HPE Next' initiative, which is its programme to "streamline" the entire business and save $1.5bn over the next three years.
HPE president Antonio Neri, who is heading up the programme, said that around $700m of these savings will be reinvested into go-to-market strategy and R&D.
He also revealed that the initiative will see HPE pull its direct presence from a number of countries that do not make a significant contribution to overall revenue.
"Today we operate in more than 160 countries; that's simply too many and it is the legacy of our prior HP business in the PC and printer business," Neri said. "As a more focused Hewlett Packard Enterprise our opportunities are much more concentrated in fewer international markets.
"We have decided to narrow our focus to where the greatest opportunities lie. To do that we're going to reduce the number of markets we directly serve to 76 countries that make 99.5 per cent of our revenue.
"This will allow us to be even more focused and shift our resources to the areas where we see the most significant returns for our company and shareholders, without the distraction of companies that don't move the needle. For the other countries we will go to a channel-only model."
Speaking more on the tier one server business, Neri said that HPE will move away from low-margin servers for the likes of AWS and Microsoft.
"For these types of customers, we will stop selling custom-designed, commodity servers while continuing to sell higher-margin products," he said.
"These commodity server deals come at very low margins and there is no services pull-through opportunity for the company. So, we are modifying our strategy to reinvest these resources towards solutions and services that will drive profitable growth."
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