HPE CEO Neri: HPE Server Battle Versus Competitors Is A 'Tale Of Two Strategies'

Hewlett Packard Enterprise CEO Antonio Neri said Thursday the fourth-quarter server share results from market researcher IDC show that HPE's strategy to forego the low- or zero-margin commodity server business is a winning hand.

"While HPE remains the leader in this market, it’s clear some of our competitors are more focused on share than profits," said Neri in a blog post referencing the IDC fourth-quarter server numbers in which Dell gained share even as HPE remained No. 1 in worldwide revenue. "Our strategy could not be more different. "

HPE and its H3C Group China partnership captured 18.4 percent worldwide revenue share of the market in the fourth quarter of 2017, down from 21.1 percent share in the year-ago period, according to IDC.

Dell, meanwhile, grabbed 17.5 percent worldwide revenue share compared with 15.8 percent in the year-ago period, IDC said.

Dell also led the market in server unit share at 20.5 percent, according to IDC, with HPE at No. 2 with 16.9 percent share.

IBM also gained share. capturing 13 percent of worldwide revenue share compared with 11 percent in the year-ago period, according to IDC.

"As I have said many times before, we are not going to chase market share just for share’s sake," said Neri. " We are going to drive profitable share."

Neri said HPE's results for its first fiscal quarter ended Jan. 31 show that its decision to "drive profitable share" is working. HPE's SimpliVity hyper-converged product sales were up a whopping 200 percent year over year in the first quarter.

Sales of HPE's innovative Synergy composable infrastructure, meanwhile, were up 40 percent in the first quarter. Finally, HPE's high-performance compute business was up double digits in the first quarter.

The strong results came after HPE decided not to pursue the "low- or zero-margin custom-built commodity server business" with tier-one service providers like Amazon Web Services, Facebook, Apple, Google Cloud and Microsoft Azure in the U.S. and Tencent, Alibaba and Baidu in China, said Neri.

"While this segment of the market is large and growing, there is simply no profit to be had by HPE or our competitors because there is very little value we can bring," he said.

Raymond Tuchman, CEO of Experis Technology Group, a Potomac, Md., HPE partner, said Neri's high-value server strategy is paying big dividends for HPE and its partners.

"Why would I sell $50 million worth of servers and make no money when I can go out and sell $10 million worth of SimpliVity and make a fortune?" he said. "HPE is getting financially wiser, which showed in their Q1 results. You can be the biggest and baddest company, but if you are losing money you are going to be gone."

Tuchman said he expects Experis' SimpliVity sales to at least double this year. SimpliVity's OmniCube backup/restore capabilities are wowing customers, he added.

Experis is doing head-to-head demonstrations at its facilities of the hyper-converged SimpliVity system backing up a 200-GB database in just 12 seconds versus 10 minutes on a converged system. "The SimpliVvity backup/recovery capabilities are a game-changer," Tuchman said. "It is crushing competitors and blowing customers away. They are shocked. They can't believe it. It's like magic."

The rapid restore capabilities of SimpliVity, meanwhile, are restoring server data in two minutes versus 20 minutes to an hour on a regular converged system, said Tuchman. Some customers that purchased 3Par systems just one year ago are looking to move to SimpliVity, he said.

HPE's focus on the high-value-growth server markets is a winning strategy, he said, adding he expects Experis' HPE business to be up 20 percent to 30 percent this year.

In the blog post, Neri said not all of the compute market segments are created equally. "We think about them as volume markets and value-and-growth segments," he said. "At HPE, we are aggressively segmenting the market to ensure we are making the right investments in the value-and-growth areas where we can bring differentiated value like hyper-converged, high-performance compute and Synergy, while also profitably supporting our customers in more commoditized parts of volume segments like rack and tower."

Neri said the IDC numbers paint a "clear" picture of two different strategies. "Some vendors are pursuing share for share’s sake, whereas HPE is focused on providing solutions that deliver high-value differentiation to our customers," he said. "We believe our strategy will prove to be the best for our customers and HPE in the long term."