 From London, England, extracting the signal from the noise. It's theCUBE, Cover, Discover 2015. Brought to you by Hewlett Packard Enterprise. Now your hosts, John Furrier and Dave Vellante. Okay, welcome back everyone. We are here live in London, England for HPE Discover. This is theCUBE SiliconANGLE's flagship program. We go out to the events and extract this signal from noise. It's day two, wrap up. I'm John Furrier, my host, Dave Vellante. Dave, six years now covering HPE Discover. Now it's HPE Discover, with the split is in place. We just had Antonio Neary on all the top executives. A Rubal wireless, kicking some butt. You got the Edge thing with the IoT. Just, I mean, just a lot of good stuff happening from HPE's product standpoint. They got the right vision. They got the right attitude. They're now shackle-free from the HPE noise around the whole HPE controversy. I mean, it went way back in the day. We were covering it. We had Leo Apatecker. Well, Mark hurried. Leo Apatecker, now Meg Whitman. The turnaround, longer than expected. The split, just, and then finally, it's done. We are at the point now where really, everything's out, no, Meg Whitman and team cannot hide. They are out on their own with what was same product strategy pretty much they had years ago under ESSN, but bigger now, company-wide under EG. You can see a lot of energy in the eyes of the people, the eye that's high, or people have the spring in their step. You can see the focus, and you're pointing out some data that you're kind of hearing about the balance sheet. They're poised, and I think they want to make a statement. I mean, I feel like HPE wants to make a statement. Here's what I think. I've been thinking about, okay, we love sports analogies. To me, it's HPE's been doing the rope dope for seven rounds, and now it's like Ali coming off in the round seven. He's lean, he's got energy, the split makes things so much cleaner. HPQ was this muddled mess, it was like whack-a-mole. One thing would go well, another thing would go bad, PCs were up, EDS is down, but now it's clean. It's very clear what HP has to do. They stabilize the core businesses, they've got to work on EDS, no question about that outsourcing business, but it's very clear what they have to do there, and they keep innovating, grow top-line revenue in constant currency, get operating profits up, I do think they can beat 10%, I really do, and really start driving that innovation, and I think they're going to be dangerous. I made the prediction years ago, they should keep it together, and I actually see things change, and my take on that is that, it's not what I had predicted, or I thought they should do at the time, but here's what happened. Well, but at the time, you felt like there was still a device play for them. No, no, no, here's why things have changed. One, the institutional knowledge of HP is important, and a lot of people were moving in and out of the company, the Apatecker, Meg Whitman transition caused a lot of turnover at the executive ranks. Meg brought a team in, locked in the strategy, and it was unattainable to have that PC thing, and it's cleaner to break at that point. If you don't have the institutional knowledge of the supply chain in the business, it doesn't make sense, keep it separate, be highly cohesive decouple and highly cohesive entities is a good move at this point. But I think this group here knows the data center. In 2011, we talked about Gen 8, and then the next year, Moonshot. A lot of the strategies are playing out beautifully from years ago, and on top of it, you got the DevOps angle, the composable with Synergy, and you got IoT right around the corner, and we heard from Antonio Neary about the wireless campus refresh, which I didn't even look at that. That's a pretty big deal when you think about the wireless implications. So I think HP is very poised right now, and they got a lot more meat on the bone than I had thought they would have on the show. They hang tough in servers where they're the leader. You've now got the Synergy, which I really do think is pretty innovative, and if it is what we think it might be, that's pretty solid. Storage right now is flat. I like to see some growth in storage. That's been, the EVA drag has been hurting this company for a while. Storage is a flat, three parts been great, but not enough to offset the decline. So I'd really like to see some growth in storage. If they can start growing in storage, you mentioned the networking piece, and if they can shore up that sort of nasty, gnarly outsourcing business, and very importantly, grow the mix toward software. Software declining flat, that's not good. Software's a growing business. So there's got to be, if I were Meg, advice to Meg, I would be making tuck-in acquisitions around software. So they jettisoned the tipping point. Security business, which I think is a great move. They sold that to Trend Micro. So now start building up again from a position of strength. That to me is what HPE does. They're throwing off cash. They're going to throw off more cash. And I think, frankly, it's going to come down to execution. They're M&A team, and their ability to continue to innovate. HPE is a cash machine. They are going to produce a lot of cash, and they're doing well right now in the performance side on the business. The synergy thing, the Apollo, the IoT, the networking thing is going to be something I think that they should put all the networking under Aruba. And I think that should move, that should happen sooner than later. I think- Well, it's interesting, that is a little confusing right now, Dom's title is president, and Tony is running networking, I think, right? Remember I asked Pat Gelsinger at VMworld, does the infrastructure dictate the applications? And then he said, yeah, and actually DevOps actually flips around the applications are dictating infrastructure, that's DevOps. The same thing's happening in networking. The core of the network used to dictate to the edge, kind of what it would look like. And I think now you're seeing the exact opposite. The wireless piece is dictating what's going to happen at the core. So HPE networking is in transition in my mind. That's an area that they've got to look at and say, hey, you know, we need to clean this up in terms of positioning and what the messaging is, because it's a solid technology base with HPE networking. They have the three-com acquisition, now they got Aruba with good management team. So I think what I would do is I'd bolt that all into one group and just run the table on networking and figure out STS. So you said something, you said HPE is a cash flow machine, that's not yet, but it has the potential to be a cash flow machine. It's very, very important, in my view, and this frankly is why EMC couldn't survive as an independent company. It's cash, this free cash flow was declining and it was very clear which direction it was going and the weight of Wall Street pressure, they couldn't handle it. To the extent that HPE, and I think they can, I mean, they threw off a billion dollars roughly in free cash flow if you split the companies this year, which was about a third of the total combined companies. I think HPE can double that and continue to double that, which, you know, gets them- And they have ultimately no debt. And their debt has disappeared overnight because of this beautiful financial engineering that they did. And the HPE Inc can pay off the debt because it is the cash flow machine. So now HPE can be a growth engine if they can get that right and, as they say, get the mix right. I mean, HPE, its margins are like single digits. It's operating profit. And so, but its software operating profit is 30%. If it can shift the mix towards software, it's a very dangerous company. I've said this about Dell as well. You know, Dell is in a sort of- It's tough to be in the software business when you're a box guy, now transforming into solutions. I mean, many schools said it right, there's technology vectors and the consumption vectors. So- It is tough. It is tough, but I think that you can sell software with hardware, which is traditionally what they've done. They've got a big data play in software. And so I put it this way, they don't need to like triple their software margins. They just need to increase the percentage of business that comes from software. I got to ask you, Dave, as the analyst and also someone who's been co-hosting theCUBE with me for six years. We know Michael Dell pretty well from getting to know him on theCUBE. What do you think he's doing right now? Because he's always looked at IHP as a target. He's got the acquisition. He's got to move fast. I mean, he's got the big EMC, you know, his toy is EMC, RSA, all that stuff. And HP's got Memster and the machine. Well- So what do you do if you're Dell? So here's my feeling about Michael Dell. Are you stuck with the transaction you got now? Are you moving? I don't think he's stuck at all. I mean, I don't think he thinks he's stuck. I think he wants to move forward. Think about Michael Dell. Michael Dell beat Carl Icahn. Who beats Carl Icahn? I mean, really, the great Icahn. Michael Dell won. So Michael Dell's a winner. Yeah, I don't think he's going to- But he's got to close the deal date. He has to close the deal. He has to close the deal. I mean, I could be wrong, but I think he's going to do whatever it takes. You hear rumors now. He's going to be spinning off Quest. Maybe some other security assets. You know, add it up. It's roughly about four billion, kind of that shortfall. Yeah, he's got IRS precious. He's going to do whatever it takes in my opinion because Michael Dell, he's an entrepreneur. He believes in the vision. And I think actually it's a good thing. It's like I was saying in Antonio, I think you can, off camera, I think you can win with different, I guess it was on camera, different strategies. Oracle can win with it's strategy. It's not a zero sum game. Michael Dell can win with his strategy. HP can win with it's strategy. It's a big market. Well, you hear that you hear the management team at HP using words like, we want to win. I mean, that's guns blaring. So, you know, I love this business right now. They're in the tournament. I love this. They're in the game. Whereas in the last couple of years, it's been, we got to fix this. We got to clean this up. And it's just so much stuff to deal with. All right, so day two summary day. What do you think's going on with the deal heel? We heard a scality mention, kind of tease they should buy scality in the storage. We heard storage is growing and winning. Their strategy with single architecture looking really good. Yeah, it's really not growing. Right now, storage is flat, which is a bit of a concern, but their contention is storage is flat, but the rest of the industry shrinking. Okay, that's a small consolation when Amazon's growing at 80% a year and it's a billion dollar company. So you got to ding them there. Three-part is doing great, but this comes from years and years and years of no R&D spigot. That's why they had to buy three-part and a huge install base transition going on. Big thing for storage, John, is they got to do more in their own install base. Should be a no-brainer. When you worked at HP, what percent of it's, you know, 10, 11% R&D revenues? No, but in terms of its attach rate. In other words, when you bought an HP server, you'd buy HP storage. The attach rate was very high. And printers. And you buy everything. It's small today. I mean, that's huge upside. That's job number one. Just do that. And you're going to be really, you know, crushing. And I think they can do more in terms of gaining share. We heard about some other programs that they have. So, but I'd like to see more out of that storage business. A lot of energy here. A lot of, I have a tiger for the employees, but you know, customers are talking some stuff. Not enough customers on theCUBE. We got to get more customers next time. But I think HP will do M&A. That came out of the CUBE. Antonymery is great. Well, I think they are doing M&A, right? I mean, you've seen, you know, you saw them actually sell some assets, you know, tipping point I mentioned, and you saw the Erube acquisition. Well, they're definitely going to buy, Dave. You're very high on the Erube acquisition. They have to buy. I am very high on the Erube acquisition. Absolutely agree. After, I'm very high on the Erube acquisition. That's going to be a strategic asset. Not from a revenue standpoint, from incremental value of HP. But let me ask you a question. So, we followed 3Com, you know, when Donatelle used to talk about 3Com all the time, we're a strong alternative to the leader, but it was basically, you know, not the core, not the high end, around the edges, a little cheaper, second choice. How does Erube change that game? Erube changed the game big time. And Antonymery answered the question interesting. He goes to the, you know, kind of camouflaged answer, which is, oh, the revenue is $15 billion campus market. He goes right to the dam. When in reality, the purchase price for wireless equipment is small on these RFPs. I mean, Levi stated, even these large campus deals, that's pale in comparison to the value that can bring HP. So yeah, 15, you know, an RFP, a couple of million bucks here and there, but it's not more than selling. It's a little foot in the door. Well, when you do it, when you spend, when you buy access points and, you know, connected to wireless, there's more in professional services than actual gear. My point is the product sales numbers are not as big. Where the value with Erube is, they own the edge of the network, okay? And with that, they get access, method information, phone information, you know, application delivery, value to the routing information for software to find, a ton of big data opportunity value. So to me, I think it's a real strategic asset. And because it's best in class wireless, huge advantage right now. I would double down on Erube all the way right now and just go hard because you'll win on other sides of that. So you talk about attach rates. You attach with Erube, you can bring a lot of value in on this converged infrastructure to ultimately cloud. So I just think huge strategic advantage right there and a differential here. So that's the other thing, the services business has been under pressure and there's good news and bad news there. The good news is they're not relying on services. And so there's upside there, but, you know, like IBM, they got to clean up that outsourcing. It's a very difficult business. So some work to be done there, but I think it's all doable. And it's very clear now what they have to do. Yeah, they're out in the track. They're going to be the racers on. They're making progress, you know, on Meg's five-year plan. They can't hide. We wish you were going faster, but now it's going to start to move. I think you're going to start to see something. This is the point where it's happening because they can't hide. There's no other excuse. You can't do anything else. You've got to perform or not, right? They kind of lost a year with the breakup. The split gave her some time. I mean, the split was a brilliant move by Meg Whitman. One, make the pivot right there. Just cut the line, split them up, highly cohesive, decoupled, but also buys time with the analysts, buys time with everybody else. They do the financial engineering, but now, okay, the race is on. Uses people a little bit. Slow down. What's under this show? I want to say shell game. It does put a pause on the end. It is a bit of a shell game. They were moving stuff around. Hey, wait, give me some more time. I need another year. So, HP Day 2 wrapping up here. Here's the cue, bringing you the signal from the noise. I'm John Furrier, Dave Vellante. Go to silkenangle.tv. We have podcasting every week. We do guests of the week. And every Wednesday, we do a podcast with our female women in tech, lady in tech interview. And of course, go to crowdchat.net slash HPE discover for all the conversation. Go to crowdpages.co slash HPE discover. That's our new crowd page. And check out this influencer social network that's ranked by this event. It's a persona-based network with a search engine. That's new from us. Take a look at that. Of course, go to youtube.com slash SiliconANGLE for all the videos on demand. And silkenangle.com and wikibond.com. For all the action. New cloud research up there. New cloud research on wikibond.com. Check it all out. Thanks for watching. We'll be back tomorrow for day three of wall-to-wall coverage from London, England's the Cube.