HPE CEO Neri: Hyper-Converged Sales Are Soaring, Hitting $1B Run Rate

Hewlett Packard Enterprise CEO Antonio Neri Tuesday said the company's hyper-converged infrastructure portfolio grew at a 130 percent clip in the most recent quarter and is now on pace to be a more than than $1 billion business.

"For partners, this means they are making more money," said Neri in an interview with CRN after HPE posted results for its third fiscal quarter ended July 31 well above Wall Street expectations. "As we pivot to the new solutions in value compute, storage and intelligent edge, this is all good profitable growth for our partners."

[Related:HPE Unleashes New Partner Ready Incentives For High Value Products, Services]

HPE's new Partner Ready program, which goes into effect Nov. 1, doubles down on the high value, high growth segments of the portfolio including the hyper-converged offerings like SimpliVity, Synergy composable infrastructure and software defined stalwarts OneView and OneSphere. "Infrastructure is changing and software defined is being adopted more and more," said Neri. "Hyper-converged is a perfect use case for that."

Neri said the hyper-converged market is growing at between 40 and 50 percent. "We think the market will continue to grow," he said. "We need the partners to come along the journey with us. We have the best platforms on the planet."

Neri said HPE's acquisition of software defined network fabric provider Plexxi gives the company an even bigger advantage in the hyper-converged market. Plexxi, in fact, brings a new era of hyper-converged network fabric composability to SimpliVity. "No one else has that," said Neri. "That gives us differentiation."

HPE OneView -- a long-standing network management standout that has been transformed into a dynamic composable infrastructure engine -- is also driving a big competitive advantage for partners in the next generation infrastructure market, said Neri.

"HPE OneView is able to deploy traditional infrastructure, hyper-converged or a super-set with composable," said Neri. "We give the partners a very easy value proposition to go sell, all running on the industry's leading compute platform called Proliant- the most secure infrastructure on the planet with Gen10. It is not just racks. It is also blades and Synergy (composable infrastructure). That is why I am very excited. The growth is there. The differentiation is there. And the momentum is there."

A big bonus for partners is SimpliVity, along with the HPE Nimble all flash portfolio, is a 100 percent channel model. Partners credit that channel commitment to helping drive SimpliVity sales growth.

Raymond Tuchman, CEO of Experis Technology Group, a fast-growing Potomac, Md.-based HPE private cloud powerhouse, said HPE is gaining momentum in the marketplace with its hyper-converged portfolio.

Tuchman said his SimpliVity sales are soaring and that his HPE business overall is up 25 percent this year. "It's been a good year," he said."I feel really good about the partnership and the products."

Tuchman said he sees the improvements in the Partner Ready program rewarding Experis' high growth, high value focus and making partner compensation more predictable. "I like the new program because I know what my compensation is going to be from dollar one," he said. "It's a better program that incents us to sell the value products. We make more money on those value products and so does HPE."

Overall, HPE reported non-GAAP diluted net earnings of 44 cents per share on a four percent increase in sales to $7.8 billion for its third fiscal quarter ended July 31. The Wall Street consensus was 37 cents per share on $7.68 billion, according to Thomson Reuters.

HPE shares were up two percent or 30 cents to $17.04 in after hours trading. That was on top of a two percent increase or 29-cent increase in HPE shares to $16.74 at the close of the market on Tuesday.

Neri, for his part, said the strong results are a sign of HPE's increasing market momentum. "Our focus on shifting our mix to higher value growth areas, while optimizing our volume business is working," he said.

HPE's Next initiative -- an ambitious plan to rearchitect the company from the ground up -- is paying off, said Neri. "Even as we focus on new growth areas, we continue to deliver solid performance across each of our business segments," he said.

HPE Intelligent edge sales in the quarter were up 10 percent year over year to $785 million compared with $710 million. HPE's hot selling Aruba product portfolio sales were up 10 percent in the quarter, while HPE Aruba Services sales were up 14 percent.

Among the major wins in the intelligent edge market in the quarter were deals with the University of Arkansas where Aruba is replacing the existing network including software and security; Caesars Entertainment, which is rolling out an HPE Aruba wireless network; and an unnamed leading auto manufacturer, which is using HPE Edgeline solutions to capitalize on the convergence of industrial internet of things and enterprise IT.

"Intelligent edge is a significant, long term growth opportunity for us and therefore a key area of investment," said Neri. "There is a major transition happening right now driven by the explosion of data created at the edge. The edge is a world outside the data center and (market researcher) Gartner says 75 percent of the world's data is generated at the edge. I am certain that the rise of the intelligent edge is the next great market transition coming. And HPE is uniquely committed to and built for this transition."

Separately, HPE announced that CFO Tim Stonesifer will be stepping down at the end of the fiscal year effective Nov. 1.

Replacing Stonesifer will be Tarek Robbiati, who was most recently CFO at telecommunications powerhouse Sprint, where he also played a key role in mergers and acquisitions and business development.

HPE said Robbiati will take on the CFO duties effective Sept. 17 working hand in hand with Stonesifer through the end of October to ensure a smooth transition.

Neri, for his part, praised Stonesifer -- a four-year HPE veteran -- for playing a "significant role" in the HPE turnaround, the largest separation in corporate history with the split of HPE and HP in 2015, and assisting with 11 acquisitions.

Furthermore, Neri said, Stonesifer was critical in the launch of two new businesses with more than $20 billion in transaction value with the HPE's enterprise services division combining with CSC to form DXC Technology and the HPE Software business combining with Micro Focus.

"Tim has been an incredible partner, adviser and friend to me as we navigated tremendous change together," said Neri. "As I said in our announcement, Tim helped make HPE's future possible. We are very well positioned for future success because of Tim's leadership and commitment to this company, our employees and our shareholders."