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The $53bn 'startup': Hewlett Packard Enterprise begins life

$150bn tech market 'to go after' in the UK

The UK country chief of $53bn “startup” Hewlett Packard Enterprise might have had a number of concerns on his mind this morning but retail stock levels or a huge separation task weren’t among them.

For HP, the grand old lady of Silicon Valley, has split in two a year after going public about plans to hive off the PC and print business into HP Inc, with the rest shifting into the HPE melting pot. The companies will trade as two Fortune 50 entities.

“I covered a business from people buying laptops and printers in Currys to our largest public sector customers and everything that sat in between,” said Andy Isherwood, the former boss of HP in the UK and Ireland, who is now running the local arm of HPE.

“I was meant to know everything and anything. My time was spent pretty evenly across the business. From today my focus and that of my sales, pre-sales and support people will be on fewer things.”

The corporate divorce at HP can be seen as nothing other than a tacit admission by top brass they couldn’t make different sides of the house work better together, as the previous HP One strategy involved.

The thinking seems to be there is no place for a tech firm that sells consumer laptops, to big iron gear, to a massive range of printers and supplies, to enterprises services. Some disagree. Dell springs to mind.

Financial results have supported this thesis with HP continuing to report revenue declines; Enterprise Services play a central role here as big ticket contracts ran off and were replaced with smaller, shorter deals, leaving holes that weren’t easy to plug.

HP has undergone a massive redundancy programme to cut its cloth accordingly, chopping 58k people since 2012, and with another 25k to 30k to go from HPE over the next few years.

Results for the UK business are not broken out but according to our maths, HPE here turns over roughly $5.3bn, with Enterprise Services accounting for roughly half of this - that means the Brit subsidiary is the second largest territory for the company outside of North America.

HPE refused to confirm our take on their local numbers but Isherwood pointed to market share gains and wins in Blighty; number one in servers; contracts with Deutsche Bank, TNT and the MoD Atlas consortium; number two in storage, networking and hybrid cloud.

“R&D will be more focused - we are keeping our centre in Bristol - on a narrower set of products and services, and when we use our breadth of channel we will be able to get more focused on programmes and opportunities around the big transformation areas, rather than talking to them about everything from PCs to high-end servers,” said Isherwood.

He claimed HPE will remain one of the big boys in the market “but we’ll be more relevant”.

UK GDP is forecast to grow between two and three per cent this year, and Isherwood said HPE expects to see local growth pegged to the expansion of the economy, as a minimum.

“I can’t see why we can’t be stronger and more aggressive than that. There’s probably a $150bn [tech] market to go after in the UK.”

Server market spending is estimated to be flat this year, and the other big infrastructure areas including services, networking and storage are also expected to report similar patterns. But there are pockets of growth in sub-segments including flash storage, he told us.

“You need to work out which of the segments are growing, and where your offerings need to be.”

Isherwood said it is about taking share in some of the legacy areas, and building on hybrid cloud, which along with security, mobility and data are the four pillars on which the new HPE will be built.

He said HP’s closure of the public cloud service recently will not weaken its portfolio, and used a diversionary tactic by quickly talking up the company’s approach to open standards.

HP’s divestment activity, which sparked a trend for comparative breakups at Symantec and CSC, is opposite to the path Dell has chosen; Michael Dell is currently negotiating to buy NY-listed EMC. This integration job of work might be manna from heaven for HP.

“Our separation is done,” Isherwood told us. “The only thing we’ve got to worry about now is launching a company and making sure that our four transformation areas resonate. I’ve only got to worry about customers and partners.”

The internal renovation that created HPE and and HP Inc was done in part to respond more effectively to structural changes happening externally across the industry - the cloud.

The cloud is starting to dramatically affect sales of traditional IT products, and HP will be aiming to grow its cloud services business by at least the same rate that classic on-premise revenues erode. This is the challenge facing all tech suppliers. ®

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