About Entco, LLC

HP Enterprise (HPE), once part of the storied Hewlett-Packard Corporation, has whittled itself down to focus its business on what it calls HybridIT. It recently spun off its $9 billion Software division and its 100,000-person, $13.5 billion Enterprise Services business. The remaining business designs, manufactures, and sells servers, storage, and networking equipment, and provides technology services to help its large enterprise customers architect and deploy IT solutions. HPE focuses its efforts on software-defined IT offerings for private and public cloud environments as well as solutions for industrial Internet of Things (IoT) applications. HPE is a global company and about two thirds of its revenue comes from outside the US. Its technology has a rich history and maintains a cache of nearly 11,000 patents.

Operations

HPE operates a corporate investments segment and two business segments. The Enterprise Group is the primary operational segment and within it are its server, storage, networking, and technology services divisions. Financial Services offers leasing, financing, and other means to help customers pay for HPE purchases. Corporate Investments include the research organization, HP Labs, and certain cloud-related business incubation projects.

The Enterprise Group generates a little more than 85% of total revenue, and within the segment the server division accounts for nearly 50% of revenue while technology services brings in 30%. The segment provides secure, software-defined technology and services that enable customers to move data seamlessly across hybrid IT environments (private & public cloud connected to traditional data centers, for example) and to provide solutions for non-core computing environments that run campus, branch and Internet of Things (IoT) applications.

The Financial Services segment provides flexible investment solutions, such as leasing, financing, IT consumption, and utility programs and asset management services. It helps customers create unique technology deployment models and acquire complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others. The segment accounts for roughly 15% of total revenue.

Corporate Investments is a cost-centered segment focused on research & development projects. From its efforts come new technologies and ideas that HPE eventually turns into products and services. Its revenue is negligible and earnings are typically small losses.

Geographic Reach

Palo Alto, CA-based HPE is a global organization with a global customer base. Its physical operations include offices, manufacturing facilities, and HP Labs R&D centers. It has nearly 20 locations in the US and Puerto Rico and about 10 outside the US, such as in the UK, India, Brazil, China, and Taiwan. As part of its HPE Next 2020 initiative it appears poised to shutter some sites.

Approximately two thirds of revenue originate outside the US.

Sales and Marketing

HPE customers are mostly large companies and government agencies. The company reaches them through its own sales staff and resellers, distribution partners, OEMs, independent software vendors, system integrators, and consulting services companies. HPE account managers maintain relationships between the company's businesses and large enterprise customers.

HPE not only sells its own products and services but partners with a plethora of technologies companies to supplement its own offerings when designing and deploying customer solutions.

Financial Performance

HPE’s size and revenue generation dwindled along with the divestiture of its two large segments, HP Software and HP Enterprise Services. In reviewing the remaining, continuing operations, of HPE, revenue decreased marginally in each of FY2016 and FY2017 (fiscal year ends October 31).

For FY2017, revenue fell 4% to $28.9 billion. HPE’s largest segment, Enterprise Group, saw its revenue decline nearly 6% due to across-the-board decreases in its servers, storage, networking, and technical services divisions. The greatest impacts came from a decline in the number of servers sold and the loss of revenue from its divested H3C network products operations. Those actions were partially offset by new revenue from two acquisitions, SGI and Nimble Storage. A positive contribution came from HPE’s Financial Services segment, whose revenue increased 13% compared to FY2016.

Net income in FY2017 crashed to $344 million from $3.2 billion the prior year. The fall was the result of various extraneous charges, including $93 million in costs related to damages to its Puerto Rico and Houston facilities from Hurricane Harvey. It also spent nearly $800 million on restructuring and transformation charges. Finally, the prior year had a $2.4 billion gain on divestitures, causing an unfavorable comparison between FY2017 and FY2016.

Cash on hand at the end of FY2017 was $9.6 billion, down $3.4 billion from the previous year. Operating activities contributed some $900 million to cash, through net earnings and large adjustments for depreciation and amortization. Investing activities used nearly $5.0 billion of cash due primarily to $2.5 billion of investments in property, plant, and equipment along with $2.2 for business acquisitions. Despite large layouts for stock repurchases and debt repayment, financing activities provided $600 million due to large dividend payments to HPE from the sale of its Software and Enterprise Services segments.

Strategy

HPE has undergone tremendous change in the past few years, first split off from Hewlett Packard Corporation followed by its subsequent divestitures of large entities, HP Software and HP Enterprise Services. In 2014, it was part of a 350,000 person $120 billion conglomerate and by the end of 2017 HPE employed less than 50,000 people and generated just under $30 billion in revenue.

With the corporate reshaping largely complete, the company is focused on transforming itself to match the demands of its customers – from a product portfolio perspective, a geographic presence perspective, and from a competitive posture perspective.

Its Enterprise Group continues to experience challenges with revenue growth due to the shifting of computing workloads to cloud deployment models instead of in-house data centers, the emergence of software-defined architectures which reduces the needs for server and networking hardware, and an increasingly competitive pricing environment. It is combating these trends with investments in its portfolio of solutions for the data center, cloud, and edge computing environments; all with an emphasis on software-defined infrastructure, which is aided by its 2017 acquisition of SimpliVity. It has a sweeping set of technologies and services making it an ideal candidate for customers who want a one-stop-shop for all things enterprise computing.

In 2017 the company launched an initiative called HPE Next, through which it plans to simplify its operating model by streamlining its offerings and business processes to support investments in high growth and higher margin solutions & services. It includes consolidating its manufacturing and support services locations, streamlining its business systems, and reducing the number of countries in which it has a direct sales presence, while migrating to a channel-only model in the remaining countries. The initiative will continue through FY2020 and will incur expenses for staff reductions, upgrading its IT infrastructure, and plant closures. It expects to partially offset the expenses with proceeds from real estate sales. When it is complete, HPE expects the initiative will drive down annual costs by $800 million.

HPE doesn't lack for competitors in enterprise IT. Longtime rival Dell is in the process of buying storage system company EMC to get even bigger. Other competitors across HPE's portfolio include Cisco Systems, Lenovo Group Ltd., Oracle, Fujitsu Ltd., Inspur Co., Huawei Technologies, NetApp, Hitachi Ltd., Juniper Networks, and Arista Networks. With the wave of cloud services changing the way customers implement their computing solutions, HPE is also competing against Amazon and Google.

Mergers and Acquisitions

HPE acquired three companies in FY2017: Cloud Technology Partners, a cloud consulting, design, and advisory services company; Nimble Storage, a provider of all-flash and hybrid storage solutions, for a little more than $1 billion; SimpliVity, a provider of software-defined computing infrastructure solutions, for $650 million.

In August 2016 HPE bought SGI (formerly Silicon Graphics) for $275 million. SGI's high performance computing products are used for data analytics and data management. The plan is to combine SGI's supercomputing capabilities to beef up HPE's enterprise offerings to provide faster and higher capacity analytics to customers. The deal is expected to close in early 2017. SGI reported a loss of $39 million on revenue of $529 million in 2015.

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Entco, LLC

1140 Enterprise Way
Sunnyvale, CA 94089-1412
Phone: 1 (312) 580-9100
Fax: 1 (408) 774-2002

Stats

  • Employer Type: Public
  • Partner Support Executive: Stacy Farrell
  • Manager, Client Infrastructure: Max Hwang
  • Vice President Data Processing: Mercedes D Luca
  • Employees: 888

Major Office Locations

  • Sunnyvale, CA

Other Locations

  • Taipei City, Taiwan