HPE places bets on edge computing, IoT, hybrid and plans to streamline operations again

HPE's biggest bet is that IoT will rely on more compute at the edge of the network. Meanwhile, HPE plans to streamline under a program called HPE Next.

Hewlett Packard Enterprise is betting on hybrid data centers and "intelligent edge" tools for the Internet of things as it aims to simplify under a program dubbed HPE Next.

At HPE's analyst meeting on Wednesday, CEO Meg Whitman outlined the company's progress and plans to become more nimble.

Whitman said:

We are all familiar with the pressures that HPE and our competitors are facing from public cloud, white box providers, SaaS as well as from the sharp increase in commodity pricing. These are all real challenges that need to be managed, but I believe these pressures are also creating major opportunities for Hewlett Packard Enterprise if we can remain focused on customer needs, approach the market through the right segmentation strategy and build a financial architecture tailored to the company's inherent strengths. If we can do all those things, I believe HPE will thrive in the years ahead.

HPE's strategy revolves around simplifying hybrid IT, using its Aruba unit to make campus and branch network more intelligent and launching edge computing products such as Edgeline. HPE will also offer services.

In many ways, HPE's efforts rhyme with what other technology giants are doing. For instance, Dell Technologies outlined its IoT strategy last week and has a bevy of cloud and data center building blocks. The move to bring more intelligence and compute to devices on the outskirts of IoT revolves around latency and costs to move data back and forth from sensors to the cloud.

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There is also an emerging data ownership issue in IoT that may also spur intelligent edge sales. HPE said it will target intelligent edge and digital experiences in workplaces, retail, industrial and smart cities. HPE provided a bevy of big customer case studies such as Home Depot and United Airlines.

See: Do you own your data and have free rein? The answer in an Internet of things, cloud world may surprise you

Whitman added:

As industries transition legacy industrial infrastructure like manufacturing firms -- manufacturing floors, transportation systems, energy infrastructure and even cities themselves, as they move to the digital world, we're seeing an explosion of data at the edge. And we believe this movement toward the edge will eventually disrupt the cloud.

Add it up and HPE's strategy isn't glamorous, but can find an audience. In addition, HPE President Antonio Neri outlined the company's latest streamlining effort--HPE Next.

Under HPE Next, the company will aim for savings of $1.5 billion over the next three years and reinvest $700 million in marketing, R&D and operations. HPE will also "optimize the workforce" and simplify its systems and real estate footprint.

It's clear from Neri's presentation that HPE has some bloat to cut. Here's a look at the operations and management structure.

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For fiscal 2017, HPE said it expects to grow revenue 5 percent and deliver non-GAAP earnings of $1.00 a share. For fiscal 2018, HPE said it expects non-GAAP operating margins to be about 9.5 percent with non-GAAP earnings of $1.15 a share to $1.25 a share.

Those fiscal 2018 earnings will come with "modest revenue growth." As for the long-run, HPE expects organic revenue growth to be flat or 1 percent.

In other words, HPE will grow via acquisition. Oppenhiemer analyst Ittai Kidron said in a research note:

We come away comfortable with management's plans to focus on specific growth initiatives (hybrid IT, intelligent edge, and services) while at the same time drive significant cost and efficiency benefits (Next program). Although some of the revenue initiatives are interesting, we believe they will be slow to develop without aggressive M&A which we don't expect the company to undertake.

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