Four takeaways from HPE's Q4 results

Antonio Neri opens up on the US/China trade war affecting prices and its major push to the intelligent edge

HPE CEO Antonio Neri had a positive first fiscal year, reporting marginal increases in its Q4 and its overall FY19. We round up four takeaways from its earning call, transcribed by Seeking Alpha.

Numbers are up

HPE had a strong fiscal 2018, with net revenue of $30.9bn, a seven per cent increase from FY17.

This trend was reflected in its Q4 results, where net revenue saw a year-on-year growth of four per cent to $7.9bn.

Numbers were also up across the board, with Neri reporting that the storage business was up 15 per cent for FY18, and its intelligent edge business also up 15 per cent for the full year.

"We continue to see great momentum in ongoing shift to hyperconverged and composable infrastructure, which is driving our customers' portfolio mix," Neri told shareholders.

"The other major trend we're benefiting from is customers' increasing demand for flexibility, both in terms of how they deploy infrastructure and how they pay for it.

"By desegregating the hardware and software elements of the infrastructure, we can give customers the cloud experience in economic on-premises with applications deciding where they should run in the most efficient way."

Pushing for the edge

In the call, Neri declared that the company was betting big on its intelligent edge offering, which is being driven by the "explosion of data".

The vendor is investing $4bn over four years to take advantage of this boom, which he claimed represents $140bn oppportunity.

He reported that HPE's intelligent edge segment reached $2.9bn in revenue in Q4, representing a 13 per cent growth year on year.

"First, we believe the intelligent edge is the next frontier and it is our top strategic priority," he stated. "75 per cent of the data is created at the edge and our customers increasingly need help to tuning all their data from the edge to the cloud into intelligence they can use in real-time."

Betting big on data

HPE grew its hybrid IT business by six per cent in FY18 to over $25bn, with EMEA singled out for its "particular strength" in this arena.

Neri commended the vendor's European team for their success "against a backdrop of political and economic challenges in that region throughout the year."

The company remains focused on its storage business,which saw revenue grow six per cent year on year in its fourth quarter.

This was attributed both to customers embracing its artificial intelligence (AI)-based analytics platform InfoSight, as well as the vendor improving its go-to-market execution.

Its big data business grew 92 per cent year-on-year in the quarter, which the vendor hopes will be boosted with its recent acquisition of BlueData.

Neri claimed its latest addition will take the company's consumption model "a step further" through AI, machine learning and analytics.

"By seamlessly combining their software platform with our existing software-defined infrastructure and services, we will be able to help our customers accelerate their AI and big data transformations and better extract insights from the data, whether on-premises, in the cloud, or in a hybrid architecture," the CEO explained.

Beating the competiton

Neri was nonchalant when asked whether the company was expecting changes to the competitive landscape, in light of Dell announcing its intention to go public.

"[Regarding] Dell, listen I'm focused of my strategy and I am very pleased and proud of what we've done here in the first year with the team, we're growing revenue of the company on the high single-digit," he answered.

Tarriffs also raised their head, due to the company increasing the price of its Aruba offering by 10 per cent in early November, as a result of the US/China trade war. The effects of those tariffs will be seen in Q1 of its financial 2019.

The CEO was hesitant to speculate on further price increases amid continued uncertainty over possible further tariff changes next year.

"We continue to work with our supply chain or suppliers to figure out what is the long-term strategic option here," he said.

"But we need to wait [and see] what's to happen with the negotiation, because of 10 per cent it makes no sense to change anything. A 25 per cent [increase, then] obviously you have to consider other options."