HPE storage decline offset by big data, converged demand

What does a vendor do when storage sales lag projections? If you’re Hewlett Packard Enterprise, you blame it on potential vagaries in currency.

On Tuesday, the Palo Alto, Calif, hardware maker reported $887 million in storage revenue for the July quarter. In dollar terms, HPE storage revenue gained 1% from the same period a year ago, but it’s down 2% after adjusting for currency.

The decline interrupts HPE’s string of strong storage earnings stemming mostly from the 2017 acquisition of Nimble Storage and, to a lesser extent, hyper-converged pioneer SimpliVity Corp.

HPE CEO Antonio Neri downplayed the slip and pointed to growth in HPE hyper-converged systems. He said that segment grew 130% year over year and reached an annual run rate of $1 billion.  Neri said HPE Synergy composable infrastructure is deployed by more than 1,600 customers.

He said demand for HPE storage is rising in analytics, edge environments and high-performance computing.  HPE plans to invest $4 billion in its Intelligent Edge segment, which grew revenue 10% to $785 million last quarter. Year to date, the Intelligent Edge-Aruba software-defined WAN product portfolio has gained 12% to $2.1 billion.

“At the same time, we saw 70% growth in big data storage. We expect improved organic growth (next quarter) as we drive increased sales productivity and as our latest storage offerings gain customer traction,” Neri said.

HPE storage revenue is not broken out by product category. The HPE storage flagship is the all-flash 3PAR StorServe family of SAN arrays. The vendor also sells entry-level MSA Series SAN, StoreVirtual systems and and StoreEasy NAS, along with HPE ProLiant SAS enclosures for server-side storage.

HPE acquired Nimble hybrid and all-flash SAN arrays mainly for the Nimble InfoSight cloud-based predictive analytics, which it has gradually been implementing on 3PAR arrays.

Still, HPE overcame weak storage performance to notch overall gains. Top-line revenue of $7.76 billion was up 4% and beat the consensus of $7.68 billion.  Non-GAAP earnings of 44 cents a share also beat estimates by 7 cents.

HPE hybrid IT accounted for 78% of the growth during the last quarter.  Sales of HPE compute servers generated $3.5 billion, HPE storage accounted for $887 million and data center networking gear produced $59 million. HPE’s consolidated revenues for the nine months through July climbed 8% to $22.9 billion.

“From a portfolio mix perspective, we continue to drive good growth in our value offerings and our core volume business continues to grow better than expected,” HPE CFO Tim Stonesifer said.

This was Stonesifer’s final earnings call with HPE. The company said Stonesifer was stepping down at the end of October. Stonesfier has been CFO since the old Hewlett Packard split into two companies in 2015. Neri said former Sprint Corp. CFO Tarek Robbiati has been hired and will take over for Stonesifer on Sept. 17.