The CEO of Hewlett Packard Enterprise tells us why the company is 'under-appreciated' and how it can beat Amazon in a market that's bigger than cloud computing (HPE)

hewlett packard enterprise HPE ceo antonio neri

Earlier in February, Antonio Neri celebrated the one-year anniversary of his ascension to CEO of Hewlett Packard Enterprise, replacing prominent industry figure Meg Whitman.
In October, HPE reported 7% revenue growth for its fiscal year from the year-ago period, and recently announced a new round of dividends.
Neri first joined HP in 1995 in customer support, and worked his way up the ladder. He says that HPE's competitive advantages are its legacy of innovation and the quality of its culture.
To that end, he's launched a sweeping initiative to practice what the company preaches and modernize its internal IT infrastructure. It helps the company move faster, while also making HPE simply a better place to work.
In terms of the tech, Neri is placing HPE's bets on edge computing, a market that could very well be bigger than cloud computing. And it's especially important, given that HPE gave up several years ago on competing directly with the market-leading Amazon Web Services cloud.
However, he says that he still has to convince investors of his vision: When HPE reports earnings on Thursday, Wall Street is expecting to post revenue and profits that are flat from the year ago period, and the stock is trading well below its 52-week high.

As the five-year anniversary of the Hewlett Packard breakup nears, there are reasons to celebrate at Hewlett Packard Enterprise, one of the offspring of the legendary tech company's split.

Earlier in February, Antonio Neri completed his first year as CEO of HPE, after replacing prominent industry figure Meg Whitman. HPE has beaten analyst expectations on profit for the last four quarters running, it grew revenue by 7% in its 2018 fiscal year, and just announced a fresh round of dividends. It even just moved into a swanky new San Jose headquarters, reflecting its plans to grow after an era of shrinkage.

At the same time, there are still reasons to be skeptical. When HPE reports earnings on Thursday, Wall Street is expecting the company to report revenue of $7.6 billion and profit of $0.35 per share — just about flat from the year-ago period. At about $16 a share, HPE is valued at $22 billion. The stock is up some 14% since the start of the year, but still below its 52-week high of $19.48.

More broadly, the rise of cloud computing providers like the market-leading Amazon Web Services has cast a shadow over HPE, and any other data center hardware manufacturer — the more customers move their IT infrastructure to the cloud, the less they're going to need expensive servers, storage arrays, and networking gear. It's a trend that has previously eaten significantly into HPE's business.

Still, Neri tells Business Insider that there's plenty of reason to be optimistic, too. He believes that over the next several years, HPE is poised to overtake even Amazon when it comes to edge computing, a technology some see as the next big market after cloud computing.

Before that happens, though, Neri says that he's focused on reinvesting in HPE's culture, including practicing what the company preaches by modernizing its internal IT systems. The general upshot, he says, is that HPE will always be competitive so long as it has the "best talent and the best innovation" — two things that are, to him, a hallmark of the 80-year legacy of Hewlett-Packard, one of the very first Silicon Valley companies.

And investors, he says, are starting to see the light — beyond dividends and share prices, he suggests that the markets will come to value HPE for its forward-looking nature, the quality of its workforce, and the ways in which it sees tech working to make the world a better place.

"Investors want to work with companies who care about the future and care about communities," says Neri.

Started from the bottom

Neri joined Hewlett Packard in 1995, in a role that's about as far down the corporate ladder as it's possible to go — answering phones in its customer service division. As Bloomberg reported last year, his started-from-the-bottom story, and his long tenure at the company through thick and thin, have made him very popular with HPE employees.

He says that his time in customer support taught him some lessons that he uses to inform his decisionmaking today. Specifically, that your best intentions as a company don't matter — things are going to break. What defines you as a company is how seriously you take the feedback, and what you do about it.

"What I took with me was the customer point of view," says Meri. "Customers are the source of truth."

Another benefit of his long tenure, Neri says, is that he "knows every process in every part of the company." That's part of why he's launched a sweeping initiative to modernize the way the company does business. The finance team, for example, is in the process of standardizing on one single financial tracking system, down from ten.

Meg Whitman

Rather than just an administrative reform, Neri sees this push as a "strategic weapon." Just for starters, it means the company can move faster — in the case of the finance team, standardizing on one system means it can close the books much more quickly than before, Neri says.

More existentially, Neri says, it just makes HPE a better place to work, and a living example of what the company is trying to do — help companies reinvent the way they do business by using technology. It's the same reason why Neri gave the design of the new headquarters his personal attention: He wants to attract, and keep, the very best talent.

"This is a capitol for employee morale," says Neri.

The big opportunity

Back in 2015, not long after the big split that created HPE, the company pulled the plug on HP Helion, its homegrown competitor to Amazon Web Services, Microsoft Azure, and other cloud giants.

Now, Neri sees HPE carving out a new niche in the so-called hybrid cloud, where customers keep some of their data in their own servers, and some in the cloud. To that end, HPE last year launched Greenlake Hybrid Cloud, a service that helps companies manage their infrastructure, across AWS, Azure, and their own data centers.

This is a big bet for HPE: Big businesses, especially in regulated industries — like finance, for example, or retail — can't or won't move all of their data to the cloud. Neri says that the company is wagering that it can help those companies modernize their infrastructure, without having to make that big switch.

"The world will always be hybrid," says Neri.

Ultimately, though, Neri has his sights set on the shift towards so-called edge computing, which he expects to play out more fully over the next 3 to 10 years.

The HPE Nimble Storage All Flash Array.

The basic idea behind edge computing is that in a brave new world of internet-connected appliances, gadgetry, and even vehicles, it's just too inefficient to send data up to the cloud over the internet for processing — a self-driving car, for example, needs to know whether to stop right now, rather than wait for a response from the server.

The answer is to make the so-called edge — that is, the device itself — smarter, in the sense that it should be able to do lots of data processing on its own hardware, relying on the cloud only for the most intensive calculations.

HPE is in a good place to conquer this market, argues Neri, because its hybrid cloud play already helps customers manage and process huge amounts of data right on their own servers.

Unlike Amazon Web Services, which is only now dipping its toes in the hybrid cloud market, HPE is well-positioned to help move data back and forth from hardware and the cloud, says Neri. He also points to Aruba Networks, a networking company it bought in 2015 for $3 billion, as giving it the fundamental infrastructure to help those devices connect with each other and the cloud.

As the number of connected devices in the world increases, says Neri, he expects edge computing to become a $400 billion market, reflecting the fact that almost everything is going to be "smart" in at least some capacity. For HPE, that's "the biggest opportunity," says Neri — much more so than the cloud market, pegged by analysts at $180 billion as of 2018.

"No matter how you slice it, it's bigger than the cloud market," Neri says.

Under-appreciated

As HPE moves to take advantage of that opportunity, Neri says that he's had to learn some lessons in leadership. In general, he says, the move to replace Whitman was "the smoothest transition we've ever had" — right before becoming CEO, Neri had served as president of the company, getting plenty of mentorship from his predecessor.

Indeed, in many ways, his strategy is continuing a playbook originally created by Whitman, who left HPE once and for all in January after stepping down from its board.

However, he says he still had some lessons to learn about what it meant to be the boss.

"The CEO is the most lonely job on the planet because everything ends with you," says Neri.

He says that he's most at home in terms of making product decisions; he knows how to work with engineering and sales teams. The "one to learn," he says, was how to talk to investors, and give them "clarity on the narrative" on what HPE is all about.

"I think we are under-appreciated," says Neri.

To Neri, everything at HPE is moving in the right direction: It's continuing to attract PhDs and other industry experts, the fundamentals of the business are strong, and it's making smart bets on where it fits into the future of computing.

"I think that's pretty darn good," says Neri.

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