 Hi buddy, this is Dave Vellante and I'm here with Stu Miniman. We're inside the studios at Wikibon and our Boston office. And we're here to preview HP Discover. This is theCUBE's fifth year at HP Discover. Stu, we started in 2011. We're excited this year to have theCUBE again. Stu and I are going to set that up. Before we do, I want you to go to hpdiscover.social. Check out the new digital experience that we'll be bringing to HP Discover. It's a second screen experience. If you're going to be at the show and if you're not at the show, it's an opportunity to connect with other social influencers and watch the live stream. You can watch Meg Whitman's keynotes. You can watch theCUBE and get all kinds of other cool content. Stu, I think the big story this year is HP's restructuring. I mean, Meg is absolutely going to have to address that in her keynote. They certainly talked about it on their earnings call recently. And it's a big deal. I think it's an inevitable situation that they had to split off into two companies. You've got two dramatically different businesses and we're going to talk about that a little bit. But I think that Meg is going to have to really explain to the audience what's going on there, what the new strategy is, why this is important, how it's going to help HP and its customers in the midterm and longterm. What are your thoughts on that? Yeah, Dave, absolutely. I mean, Discover has always been the enterprise show for HP, so there shouldn't be a huge change for most of the audience there, but it's been one of these things that's just been hanging over like a lead balloon. How is HP going to change? What's going to happen? And we're three years into Meg doing her thing here and this is a piece that just has to get done so that HP can move forward with its mission to help enterprise and provide take. Yeah, I mean, I think HP Inc, which is going to be the PC and printer division, is going to be really essentially a cash flow type of operation. And it's going to be for the type of investor that wants to get predictable cash flows. I mean, Inc is very profitable for HP. I think HP Enterprise is going to be positioned as the growth company, and we're going to talk about that. That's obviously, they're facing some challenges there, although there are some tailwinds and headwinds, as we talk about. And so that's going to cause some dislocation in the near term. There's no question about it. There are disk synergies when you bring companies together, Stu, as you well know, having worked at a large company, you can find synergies when you split companies up. IT and legal, centralized marketing functions, those synergies go away. So HP has to make up those synergies in a couple of ways. One is with greater focus, sharper focus, better execution, and then continue to take costs out of the business. So that's, we're going to hear a lot about that. Now, let's focus, Stu, if we can on the enterprise piece, which is really where our main area of coverage will be. It's mixed. You're seeing overall, actually the enterprise group did pretty well this last quarter, relative to its peers. I mean, essentially, the business is flat. Now, one of the challenges that HP has, of course, as all companies in the US are facing right now are currency headwinds. HP's got a double whammy because its printer competition is largely Japanese. So they not only have appreciated dollar conversions, they're competing with competitors that can sell at more attractive prices. But back to the enterprise, Stu, the big news this year was really the ISS, the industry standard server group. It blew away its numbers. The growth there was 17% in constant currency, 11% in real dollar terms. So 17% growth in an apples to apples comparison with last quarter, that's huge. And that has been a soft spot, ISS. The networking side underperformed and disappointed. So what's going on in networking? Yeah, Dave, first of all, from what I've heard, in general servers had a little bit of a comeback this last quarter. So HP's writing that wave. When you look at networking, it's been a little bit of a tough transition for HP as to where they're going to have their big growth. The SDN has not matured as fast, which many in the networking industry hoped would mean that we get people off of Cisco. NFV is an area that HP has been focused on. They've had some chairs shuffling there. And now Sargalise running that. Yeah, so Sargalise running this, now Bethany Meyer was running it last year. One of the things that I like what HP's done is they're really understanding that we need to go to more commodity hardware. And while HP's always used, you know, merchant silicon, they are now doing what they call Brightbox, which a Brightbox is, is you take the hardware itself from a company like Quanto, one of the ODMs, the Taiwanese typically, on top of it, you have some flexibility on the software. So things like Cumulus Linux can sit on top of that. And what you wrap that with is HP brand, HP services, kind of the warm hug that the enterprise wants. So they say, I can get a cheaper price, but it's going to work, I can trust it, I like it. Dell has moved down this path before HP does, but it's still early, so we really haven't seen the results if this good strategy actually turns into good revenue. Yeah, so as I say, the networking business was down pretty considerably about 11% in constant currency. I think, as you pointed out, it was the server business, the ISS group in particular, that really drove the business. And I think, Stu, that's a Windows server 2003 refresh, and I think it's also the Gen 9 kicking in. You know, that's a great product, and that's been a tailwind for HP, and what it resulted in, so as I said, it was basically a flat business, you know, in real terms, but in constant currency, the enterprise group actually grew about 5%, which is significantly better than sort of the average of the peers. Yeah, and Dave, if you want an indication whether networking is ripe for some growth and change, you know, Wall Street Journal reported today that Avago is looking to buy Broadcom, at least it was, at $37 billion. So massive acquisition, if it actually goes through, you've actually got the group that used to be Agilent, which was a spin-out from HP that really knew that silicon, that ASIC business, and Avago, who bought Emulex just a few months back, had bought some of LSI's old business, and now if they get Broadcom, they are a massive player network, and HP will be one of its biggest partners. Okay, and then HP, of course, made an acquisition recently in networking to shore up what its wireless piece was. Yeah, it was the SDN piece, Consenta, oh, there's that one, and then there's the other one. It was Ruba, right? Yeah, Ruba, Ruba was a big acquisition in the wireless space, absolutely. Yeah, so that shores up their wireless strategy. Yeah, I mean, there's lots of consolidation and moves going on. So, the world needs a second alternative to Cisco, and is HP it, or is it some other SDN supplier? So, you know, from a market share standpoint, HP has been number two. Unfortunately, we haven't really seen a lot of growth the last few quarters, as you mentioned, from HP, and there hasn't really been a new leader in the SDN space or moving that forward. Some of it is gonna be that transition on the hardware side that we were just talking about, and the software's still maturing, and we know change in the network world, and in the enterprise network world, especially, is usually measured in a decade, so it's tough still in the early days to sort that out. So, Stu, for years I've been saying that HP's a company that has the shrink to grow. It's been doing the shrink part, it hasn't so much been doing the growth part. Let's stick to the enterprise group, which actually did grow in constant currency. Storage was very mixed. So, storage was down 8% in real dollars, but it was only down 2% in constant currency, but still, what's happening in storage too, and I'd love to get your take on this, is the new stuff, which is in the hot, you know, shiny new toys, which is three-par, and now, of course, the three-par's been in since 2011, is growing very, very nicely, and we're going to talk about all flash in a minute. There's a big kicker from that, but the old stuff is declining faster than the new stuff is rising, and so they're still not able to find that growth groove swing, but they've got a good portfolio, particularly with the three-par products, but what's your take on HP in storage? Yeah, so Dave, a couple of years ago, HP said we have this whole portfolio, EVA was shrinking, where are we focusing, and there were four products that they said were focusing on. Three-par was at the top of the list. Store virtuals, one that doesn't get talked about a ton. I mean, those that have been in the storage industry for a while, remember Left Hand was like one of the original iSCSI companies that was really cool. Left Hand turned into the first VSA solution. That was really cool, and oh, by the way, talk about software-defined storage, that's what the Left Hand technology was, so in many ways, I felt that what is now store virtual today was really ahead of its time. We've just finished up the numbers for server sand for the last year, and HP is a player in this space, and if you look at the hyper-converged market, HP by the end of this year should be number two or number three player, so they don't get a lot of talk in that space. Matter of fact, one of the major analyst firms kind of excludes that when they put all the pieces together, but if you look at what it's done over the last couple of years, it's really grown well, and of course, three-par, as you mentioned, is the shining gem in what HP's been doing, doing great in the hybrid, all-flash array mix that we're kind of having out there. Well, I mean, I like to follow the money, as you know, three-par is where the money is, so when HP bought three-par, it was doing several things. One is it was filling the hole, because its EVA line need to be short-upped. The other thing is it was buying an architecture that could go down market and compete with EMC's VMAX, which clearly three-par has been a sort of thorn in EMC's high-end side. Now with all-flash arrays, I think three-par actually surprised me, so what three-par did is they didn't go out and buy an all-flash array company like EMC did, like IBM did, what they did is they re-architected essentially three-par to accommodate all-flash arrays, and a lot of people said, of course, a lot of the competitors and particularly the startups were saying, well, that's a bolt-on, which is what three-par's marketing was for all those guys trying to replicate virtualization. What surprised me is how successful it's been from an architectural standpoint. It's a very solid product, it's got great performance, it's not a scale-out architecture per se, but with Federation, you can get eight nodes, and David Floyer talks about that in terms of sort of being where that sweet spot of that market, but the real interesting thing, I think, about three-par is 74.50, and I always forget the product names, whatever else they call the all-flash array is the stack. So to me, Stu, there's only two companies out there, maybe I'm missing somebody, but from an all-flash array standpoint, that have a full, robust, mature, hardened storage stack. That's HP with the three-par, all-flash array, and it's IBM. Originally, IBM, you had a connect behind an SVC, but with a new product, they've integrated that. So HP and IBM, I think, stand alone there. Extreme I.O., Pure, the other guys- Solid Fire. Solid Fire, great products, but they don't have the maturity of the stack. And so to me, that's an advantage. Why? Because people want the sets of storage services that they're used to. They want to know that it's going to give them five nines, or maybe even six nines. They want to know that it's going to have the replication capabilities, the failover capabilities, the recovery capabilities, the data movement capabilities where they have to move data, et cetera, et cetera. So I'm quite sanguine on three-par's all-flash strategy. Yeah, no, it sounds good. I think Gartner had them as the fastest growing, and it's a recent report, or Magic Water, or whatever. So Dave, the other piece we haven't touched on yet is Helion, it's a big piece of the strategy, something that's gone through a lot of chain from HP. I think it's interesting. Well, let me set it up straight, because on the call, on the earnings call, not a lot of talk about cloud, not enough talk about software. Software was down, and we'll come back to that. Not a lot of talk about analytics and paths and all these things that are exploding. So what about cloud? What about Helion? I mean, Meg mentioned it, but it really wasn't a focal point on the call. Well, obviously, the Eucalyptus acquisition got a lot of people excited. We thought Martin Mikos was going to come in, he's going to run this business, the strategy is going to get in shape. OpenStack last year, HP came in, said, $1 billion, 1,000 people, we're all in an OpenStack, and then a lot of things changed. So a little bit of shuffling around, and I had a good chance at OpenStack Vancouver to sit down with a bunch of the HP Helion people, talked to a lot of the practitioners here. HP's got a lot of good people. The strategy is coming into good shape, but you've got to do all that before revenue starts flowing in, Dave. And you talk about the PaaS layer. Cloud Foundry has the foundation now, and you've got Pivotal, IBM, and HP. And HP is strong here, but it's not nearly as far along with its messaging and its selling as Pivotal and IBM on. And from an OpenStack standpoint, HP's contributing a bunch, HP's putting them together a lot of solutions. As a matter of fact, one of my highlights of the interviews that I did, Bobby Patrick really laid out how HP Helion isn't just OpenStack, but how it's gonna tie together all the clouds, all the applications, because we know customers aren't just doing one cloud, and they've got so many applications. They're doing Amazon, they've got Salesforce, of course they're using Microsoft apps all over the place, and they've got what's in-house. And if OpenStack is going to be what's now called the integration engine, HP Helion has to have management software that can help with identity, management, and security across all of your environments. And it's early days, and we know how much management needs to mature overall in the market for cloud, but HP definitely is a contender here. Well, HP has a strong security storage, as you're saying, but they've got to, in my opinions, to play that hybrid cloud card, right? I mean, they kind of headfaked themselves in the market a little bit. Remember, they did announce the HP public cloud, and they were kind of looking at maybe taking Amazon head-on, well, that didn't work out so well, and it's taken HP a long time to get here. Now, having said that, look what happened when IBM went out and bought a soft layer and started to shore up its assets around there and did Blue Mix, which is running on cloud foundry. So it is early days. I would like to see a faster rate of acceleration for HP, because it is such a crucial business. People, we know that people want to buy IT as a service. Amazon has shown that the rest of the industry is showing that HP's own customers are telling us that. We've had really interesting interviews with guys like Alan Nance. That's the direction that they're headed. So it's natural that HP's going to be delivering those types of services. I'd like to see it happen first. Yeah, Dave, on the closing remark from Joe Tucci, talking about the Virtustream acquisition for $1.2 billion was Joe said, if you don't have a cloud-first strategy, you don't have a strategy. We know that Microsoft is, you know, Azure public cloud-first and then they bring it in. I'd be shocked if Meg makes such a statement in her keynote and unfortunately, if she doesn't make such a statement, I'm questioning how cloud fits into the overall strategy. Well, I think actually you will hear a lot of emphasis on cloud at HP Discover. I think there has to be. I mean, HP, it's got to get through the split. Got to get through that. HP has to address that because people I'm sure are saying, well, what does this mean for me? Once it gets through that, which I'm presuming is going to be in the first day keynote, it's got to turn its attention to all the hot stuff. What are those hot things? It's cloud, it's analytics. It's taking systems of record and systems of engagement and overlaying systems of intelligence and delivering infrastructure that can support those new mobile apps. That's what I want to hear about. And I want to hear proof points that HP's got the capabilities, the technology, the portfolio and the customer momentum to actually deliver on that. Yeah, Dave, I mean, we know HP actually runs a separate show here in the Boston area to focus on the big data piece. So I expect to hear some of it discover, but it's not one of the main focuses. It's a little bit more of the infrastructure piece. Well, you know, that's a great point. I mean, Vertica, the Vertica conference that we actually bring the cube to in August is a phenomenal conference. I would say of all those MPP players, when you take Vertica, you take Natesa, Aster data, Green Plum, I think that Vertica is demonstrating that it has one of the best, or if not the best architecture. You talk to its customers, you find out what they're doing, you ask about the competition, it's hot. That's a great, great show with real practitioners. So maybe they save some of the content for Vertica conference, but I would really like to see more in HP Discover because that to me, that is the future. Again, people talk about systems of record and transactions and social data and systems of engagement. It's that data overlay, that systems of intelligence that Vertica can deliver and HP has a great asset there. Yeah, Dave, absolutely. When we went to IBM Interconnect, it really talked about moving up the stack. You take platforms, you have APIs for services, you talk about the applications, you talk about the business value. Even EMC World this year, which is traditionally a storage and infrastructure show, really pushed up talking about some of the cloud native applications, talking about that piece. So, you know, the hope is that many of these infrastructure shows can move up the stack, talk more about the developer, talk about the business value in the applications, which if you don't have the applications piece, you're just talking about more of the plumbing. So, okay, so good summary. I mean, come back to the money. So HP's still throwing off a lot of cash. It did about, you know, 700 to 800 million in free cash flow in the quarter. It's got a target of three and a half to four billion free cash flow for the year, which by the way is down. And it's down, you know, in a large part because of the currency headwinds, but you'd like to see a company the size of HP throw off more than say three and a half or four billion. That's about what EMC throws off. EMC's about the quarter of the size. So you'd like to see HP become more profitable. Splitting off and getting more focus should help. The key for HP is to maintain relevance with its product line, continue to juice the R&D because we know under previous administrations, HP squeezed R&D. You can't just flick the switch. We've said that many, many times. You saw that with 3PAR. 3PAR execution has been outstanding. I'd like to see that in networking. It seems like Antonio Neary really has got the server group, you know, back in business. I mean, you know, the BCS, the old sort of digital line is going to do its, you know, it's going to fade away. You know, it's going to keep it maintained. It's customer base and keep those guys happy. And I love that part of the business. I mean, I love those guys. I love talking to the people who are using it. They're unique systems, but it's not a growth market. They've got to really maintain that R&D edge and basically allow the old stuff to hit bottom and have the new stuff, you know, exceed. I'll give you the last words, Stu. What are you looking for and discover and what are you looking for for HP? Yeah, so for HP overall, Dave, you know, think about what we talked about here. It was some of these big acquisitions, 3PAR, Vertica, that are some of the shining gems there. HP needs to become more profitable after the split so that they can make some of those more strategic moves, make some of those big bets, where are things like containerization that are going to fit into their strategy? And, you know, what is the new HP? It's, you know, HP is one of the companies that really helped at the foundation of Silicon Valley and, you know, we talk about putting that innovation back into HP. Yeah, HP is Silicon Valley icon. I have said many times, HP's got to get back to its roots and invent. I'm sure we're going to hear a lot about the machine, speaking of invention from Martin Fink, who runs HP Labs. Okay, thanks for watching, everybody. Thanks, Stu, for helping out. Check out hpdiscover.social. That's our new digital experience. Watch theCUBE at siliconangle.tv and check out all the research at wikibond.com. Thanks for watching, everybody. We'll see you next time.