Hewlett Packard Enterprise Co at Bank of America Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ruplu Bhattarcharya - Bank of America - Analyst : So Marie, we've got lots of things to talk about, but maybe I'll just start with, you've had experience with both branches now HP Inc and HP Enterprise. What made you switch to this branch of HP?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Yeah, I mean, you had really good quarter and reported yesterday, and we're going to talk about a lot of different things. And I'm going to talk spend some time on AI servers, but let me ask you about an announcement that you had even before the earnings call, which is on the H3C divestiture and what, can you just remind us what exactly are you selling H3C now in tranches? And how does that affect the value that you hope to realize for H3C?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Got it. And can you just talk about HP's overall strategy for China? I mean, what how do you see that market?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Okay, got it. The other thing I want to talk about before we get into the details of the earnings call yesterday is the Juniper acquisition. So can you remind us like what's the rationale for that acquisition? And how are you thinking about the revenue and cost synergies related to that acquisition?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : And one question we received from clients related to this is, are there any restructuring charges or how should we think about cash flow accretion from that deal?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Okay. Thanks. Another thing that happened was you have restructured your segments. So can you talk about the rationale for that? And how are you thinking about the business in terms of different segments?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Got it. That make sense. So now let's start talking about each of the segments. Let's start with the server segment. You had a phenomenal report yesterday. The thing that struck me as unique was the commentary on enterprise AI. We have heard your competitors, Dell and Supermicro. They talk about hyperscale, they talk about second tier CSPs, but the focus that you've had on enterprise AI seems to be unique. So can you talk about what you're doing with enterprise? What are you seeing? Are you actually seeing enterprises getting into AI?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Agree, 15% of $4.6 billion I mean, that's not a lot of small number, right? So maybe the next thing I want to talk about is a server margins because I think that's a focus for a lot of clients. Can you talk about how you see the trend in AI server margins, both on a sequential as well as on a

Question: Ruplu Bhattarcharya - Bank of America - Analyst : So I want to ask a couple more questions on AI server margins. And these are questions that we've gotten from clients. So if we -- you had a strong quarter, you took a full year guide both for revenues as well as for EPS. But for on the EPS side, it looks like you're getting some benefit on the OI&E line as well as a part of H3C that is still in the P&L. So is there -- how should in that context, does it mean that the AI server margins are dilutive? So how should one think about that?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Makes sense. As you mentioned that a server market today is very competitive and people are trying to gain customers gain market share. So in that context, I mean, do you have a baseline margin below which you won't go. I mean there are some investors were concerned that margins can be zero or margins can go negative. So how do you think about how aggressive you want to be on margins back in this land grab, so to speak, for AI server customers.

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Maybe Mary, I want to ask you about the relationship with Microsoft. Can you talk about like how long the relationship has this been? And what are the type of workloads that you're helping Microsoft with?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : So it seems to me that liquid cooling will become much more relevant going forward because all the new accelerators are coming out, they need to have liquid cooling to maintain the energy, their temperature requirements. So when we think about margins, again, I'm coming back to margins because it's a focus for a client. You think that gives you the opportunity of having this expertise in liquid cooling. Can you charge more for that? Can margins be better for liquid cooled racks? And how do you think about margin progression over time?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : That's great, help me understand the relationship of a high end GreenLake hub is one helping the other, like are you seeing more GreenLake business because there's demand for AI? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 05, 2024 / 3:40PM, HPE.N - Hewlett Packard Enterprise Co at Bank of America Global Technology Conference And is GreenLake helping customers get into AI? And how did you -- what was the impact on GreenLake revenues and ARR from AI? If you can give us your thoughts on how these things work together?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : That makes sense. Antonio made a statement last night, which I found interesting. You said that the pipeline for AI servers is multiple times the backlog. So given that? Is it reasonable for us to think that sequentially you should see a server revenue order and backlog growth in this next quarter?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : So I want to ask you a couple of more questions on the server segment. Let's talk about super computers, the Cray supercomputers. I mean, how do you see revenues from that flowing in this year?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Make sense. The other thing is we've talked about AI servers. What about general-purpose servers? How has demand been for the Gen11 servers? I think you raised your AUPs, is there more scope to raise prices?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : In terms of partners is, NVIDIA the main partner today or do you have any plans to expand beyond them over time?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : I will.

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Got it. So it looks like HP has a lot of great future in AI sort of where you've got lots of opportunity. How do you want to talk about some of the other segments real quick?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Well, let's talk about intelligent edge. How are you seeing revenues and margin progression in that segment?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : But how about hybrid cloud? How should we think about revenues and margins?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Great, in the time that we have left, I want to ask you some financial questions. Talk to us about how you see your ASPs inventory trending cash conversion cycle and expectation for free cash flow for this year?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : That makes sense. Antonio made an interesting comment. You said that OpEx in first half of '24 was less than first half '23. How should we think about OpEx for the second half of '24?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Just to clarify on the free cash flow guidance, does that include any payments related to H3C?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : And maybe in the two minutes or so, we have left. How about investments? How are you thinking about CapEx? How are you thinking about R&D spend? I mean, what are some of the areas? How should we think about that dollar amount of spends trending over time.

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Again, I want to end the session with another question on AI servers because that's -- clients want to hear about that. So again, this is a very competitive market. Are you being prudent in the sense that are you walking away from any deals like or is there are you trying to be accommodative for everybody? So just your thoughts on are there segments that you don't want to be part of?

Question: Ruplu Bhattarcharya - Bank of America - Analyst : And on sovereign AI, do think that their unique qualities that HP has to tackle that demand from sovereign entities.

Question: Ruplu Bhattarcharya - Bank of America - Analyst : Okay. I think we covered a lot of different things. So Marie, thanks again for joining us. And thanks for all the details. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 05, 2024 / 3:40PM, HPE.N - Hewlett Packard Enterprise Co at Bank of America Global Technology Conference