In the three year turnaround of HP, CEO Meg Whitman characterizes FY 15 as being a year of "accelerating progress," in which the combined company invested in security, networking, and cloud activities and acquisitions, as well as on improving execution.
She noted that research and development as a percent of sales increased in each of the three turnaround years. The company, she said, introduced new products and services, e.g. all flash memory, 3Par storage, HP OneView, software defined networking, a Gen 9 server, enterprise-wide implementation solution for Office 365, and HP Helion, i.e. the public cloud.
Post-split, HP Enterprise will have pro-forma revenue of about $50 billion, with operating margins of over 9% and operating income of about $5 billion. Fifty percent of revenue will come from enterprise hardware, 37% from enterprise services, 7% from software, and 6% from financial services.
Notice the absence of any reference to Big Data, a major theme of several conference calls during the three year turnaround period. IBM still talks about this theme, especially in its research publications, and in connection with Watson. What happened? Autonomy. The only way this acquisition made sense was as the analytical engine and product generator for a Big Data effort. That investment has been vaporized, and whatever remaining products are in the market can't sustain a major presence in this theme. A definite weakness going forward.
We've written for more than three years about the weak, commodity service focus of Enterprise Services. Despite the cost base restructuring, the fundamental weaknesses of this business compared to others like IBM and Accenture remain.
A $4 billion software business which has flat lined for several years is too small to be important to the needs of CIOs in the transition to the next generation data centers. Another weakness that we've identified for years is still in the standalone company.
I would surmise that CEO Whitman, in her heart of hearts, sees the same landscape. How else to justify a statement like more than 90% of the IT spend over the next several years will be what she calls "traditional IT." This should be comforting to investors, presumably, because 50% of HPE revenue will come from traditional hardware boxes. Also, traditional hardware sales have historically been accompanied by enterprise services contracts. Actually, these statements, which may be correct, are reasons to be very much afraid if one were an HPE shareholder.