HPE’s Journey, Progress, and FutureOctober 18, 2016
By Meg Whitman
Nearly one year ago, we launched the new Hewlett Packard Enterprise. Today, I’m in San Francisco at our annual Securities Analyst Meeting, to discuss the journey we’ve been on over the past five years, the progress we’ve made, and our strategy for the future HPE.
THE STARTING POINT: A company facing significant challenges
To fully understand our progress, it’s helpful to first consider our past. When I joined HP in 2011, the company was in a weak position, with significant internal and external challenges.
There were significant shifts happening across all of our major lines of business driven by cloud, the rise of mobile, the explosion of data and associated security risks.
HP’s portfolio was heavily weighted towards low growth assets across the technology stack.
Revenues and profit pools for our most profitable businesses were declining.
We faced multiple challenges in execution – from our competitive focus and go-to-market, to under-investment in R&D.
Our cost structure was not aligned to our revenue performance and we had a weakened balance sheet.
We had uneven earnings performance, including a few missed quarters.
And, let’s not forget, I was the third CEO in less than three years.
Our customers, partners and, to some degree even employees, were starting to lose confidence in the company.
THE TURNAROUND: A five year journey
When I took over as CEO, we embarked on a five year journey to turn the company around and create value for shareholders and our employees, customers and partners. And, we’ve certainly come a long way.
The first step was to diagnose the problems facing the company and begin to build a solid foundation on which to base the turnaround. In FY12, we stabilized leadership and we went back to the core founding values of this company. As I’ve said before, you can’t kill founder DNA.
In FY13, we focused on fixing and rebuilding the business to improve our operations, drive better cash flow and rebuild our balance sheet – all essential steps to move the company forward.
In FY14, we focused on recovery and expansion. We stabilized our revenue trajectory, reignited innovation and strengthened our leadership in key markets.
FY15 was all about accelerating our progress by continuing to invest in high-growth opportunities and improving execution.
By the end of Fiscal 2015, we had made tremendous progress.
We had reignited our innovation agenda, transformed our go-to-market and aligned our sales motions to meet the changing industry dynamics and customer buying patterns. We also improved our cost structure, re-engineered business processes, improved automation and productivity. And, one of the big focus areas for us was to strengthen our balance sheet and improve our cash flow.
As the markets continued to change at lightning speed, it was clear that the future was going to belong to the fast. So, on the first day of FY16, we separated HP into two new companies – HP Inc. and Hewlett Packard Enterprise – so both companies could move faster and have deeper focus on the unique markets in which each company plays.
I can tell you with certainty that separating the company was the right thing to do for our customers, partners, employees and investors. Both companies now have the independence, focus, financial resources and flexibility to respond to a constantly evolving market while generating long-term value for shareholders. One proof point is that today, the stock price of the two companies combined has increased more than 200% since the low of 2012.
THE NEW HPE: A stronger, more focused company
As a standalone HPE, we’re much better positioned to move with the markets and win, keeping up with a technology landscape that is shifting at lightning speed. We’ve embraced these changes in the market, and formed these core beliefs:
First, is that the world will be Hybrid. We know some of our customers’ applications will stay locked in a data center untouched by anyone but their own employees. Some applications will be on a private cloud on premise that give the economics of public cloud and the control and customization that our customers want. Some applications will be in a managed environment like Workday or Salesforce, and some applications will live in a public cloud.
Second, is that the emergence of the Intelligent Edge is going to unleash an industrial internet of things revolution. This revolution will have enormous impact on everything from manufacturing and transportation, to healthcare and education.
And third, is that Services are going to be critical. Customers are looking to implement solutions to support these market trends.
These core beliefs support our vision:
To be the industry’s leading provider of hybrid IT, built on the secure, next-generation, software-defined infrastructure that will run customers’ data centers today, bridge them to multi-cloud environments tomorrow, and power the emerging intelligent edge that will run campus, branch and Industrial IoT applications for decades to come. All delivered through a world class services capability.
And our strategy is aligned to that vision.
First, the world is going to be Hybrid and we make Hybrid IT simple. And we do that through our offerings in the traditional data center, software-defined infrastructure, systems software, private cloud and through our public cloud partnerships.
Second, we power the Intelligent Edge through our offerings in Campus and Branch via our Aruba products and the Industrial Internet of Things with products like our Edgeline Converged Systems. I like to say, we are going to be the IT in IoT.
Third, services are going to be more critical than ever. And we have the expertise to make it happen and can accelerate our customer’s journey through our 22,000 Technology Services professionals. We can build customer solutions from the ground up, and deliver world-class support, advisory and consumption models.
We also have our Financial Services organization. This is strategically important to our customers as they increasingly look for financial flexibility and consumption models.
THE FUTURE: We’re well positioned to win
What I hope that our analysts and investors take away from our discussion today – and what our employees, customers, and partners take away from our progress everyday – is that HPE is well positioned to win.
- We will win because of our sharp focus on hybrid IT with increased innovation to help customers solve their most challenging problems.
- We will continue our focus on the channel. In fact, with the spin-merges of ES and Software, our partner ecosystem will broaden even further. And partners will remain in the center of our multi-cloud strategy.
- Our operating model is simpler and the organizational structure is flatter, giving employees a clear mission and vision.
- And our investors will see an improved financial profile with better revenue growth, higher operating margins and cash generation. Our strong balance sheet will enable significant shareholder returns and disciplined investments.
With a clear strategy, we will be more focused than ever on how we innovate in our business models, our products, our solutions and our go-to-market—resulting in a tremendous financial and growth opportunity.
I want to thank everyone who has been on this amazing journey with us. We're living in a world where continuous improvement is essential to long-term success. I am pleased with our progress, and I am excited for our future.