HPE Software revenue analysis

HPE continues to narrow down its portfolio at the corporate level, with software to be used primarily to support customers’ hybrid infrastructures, says Molly Gallaher Boddy, analyst at TBR.

Hewlett Packard Enterprise

Fourth quarter revenue of $12.5 billion (–7 percent)
Fiscal 2016 revenue of $50.1 billion (–4 percent)

Fiscal 2016 Q4 results

Enterprise Group $6.7 billion (–9 percent)
Servers (– 7 percent)
Storage (–5 percent)
Networking (–34 percent)
Technology Services (–4 percent)

Enterprise Services $4.7 billion (–6 percent)
Infrastructure Technology Outsourcing (–7 percent)
Application and Business Services (–3 percent)

Software revenue $903 million (–6 percent)
License revenue (–5 percent)
Support (–7 percent)
Professional services (–7 percent)
Software-as-a-service (SaaS) (–1 percent)

Financial Services $814 million (+2 percent)

Meg Whitman, president and CEO of Hewlett Packard Enterprise, said: “During our first year as a standalone company, HPE delivered the business performance we promised, fulfilled our commitment to introduce groundbreaking innovation, and began to transform the company through strategic changes designed to enable even better financial performance.”

Following last quarter’s announcement that it would spin-merge many of its non-core software assets with Micro Focus, Hewlett Packard Enterprise (HPE) reported another quarter of software declines in 3Q16, with overall software revenue falling 6 percent year-to-year, driven down by a license decline of 5 percent and support (maintenance) decline of 7 percent year-to-year. While industry peers show strong SaaS growth, HPE reported a slight year-to-year decline of 1 percent in SaaS, supporting its decision to rid its portfolio of solutions that have dragged down the segment’s profitability.

While the future of HPE’s approach to software will remain in question until the transaction with Micro Focus formally closes in the second half of HPE’s FY17, events over the course of the past two months do indicate that HPE is continuing to drive its portfolio towards reliance on hardware-focused infrastructure offerings, using any remaining systems software pieces as the glue in customers’ hybrid IT environments as they adopt hyperconverged and software-defined solutions.

The planned spin-merge of HPE’s Enterprise Services arm with CSC and recent reports of headcount declines within HPE’s open-source development groups like Stackato further indicate that HPE plans to de-emphasize certain services as well as certain Helion cloud offerings. Should such changes take place, they will help solidify software’s place within the corporate portfolio as an underlying technology that exists primarily to support HPE’s hybrid IT ambitions rather than a standalone, customer-facing business.

To best position its remaining assets ahead of the planned software spin-merge, HPE doubles down on its composable infrastructure messaging

Since confirming in September that it plans to spin-merge much of its software business with Micro Focus, HPE has worked to better message its narrowing focus on composable infrastructure. HPE will give customers software-led or modular infrastructure options that support both cloud and legacy assets by investing in remaining products such as its Helion Cloud Platform, OneView and HPE Synergy. Overall, HPE’s vision for the software pieces it keeps in-house involves enabling customers’ hybrid IT environments as it further disaggregates and builds out its software components. While HPE is currently cutting back on the size of its portfolio to realize cost efficiencies and rationalize its offerings, a purchase that increases the company’s scale in hyperconverged might make sense in the near future to help HPE better position itself against competitors such as Dell Technologies, Lenovo, and NetApp.

Questions arise about Helion’s future, as Micro Focus and SUSE may become responsible for much of HPE’s underlying open-source technology

HPE continues to focus on open-source initiatives that use a combination of cloud and software capabilities. In fact, HPE recently made its newest version of HPE Helion Stackato, 4.0, generally available, emphasizing its ability to assist multi-cloud users with a web console that supports application creation and deployment. HPE also announced its Helion OpenStack 4.0 update in October, with more provisioning, scaling, security and management capabilities that help the infrastructure offering appeal to buyers such as telcos.

Despite ongoing open-source announcements, HPE is apparently cutting much of its internal development staff as it prepares for a software spin-merge with Micro Focus. HPE will rely heavily on Micro Focus and SUSE as open-source partners, with plans to sell Stackato to SUSE (a part of Micro Focus). HPE recently let most of its Stackato staff go, in addition to many OpenStack developers, with some reports indicating that HPE’s whole OpenStack team is now gone. Without OpenStack talent, TBR believes there could be significant changes to HPE’s data center footprint and hosting opportunity, potentially limiting the breadth of its cloud portfolio.

Related News

Latest News

Latest News