 The Advanced Extract is soon from the noise. We are here live in Barcelona, Spain. This is theCUBE. I'm John Furrier, the founder of SiliconANGLE. I'm joined by my co-host for the next three days, Dave Vellante, co-founder of Wikibon.org. And we are pleased and excited to be covering for the, I think, fourth year now, Dave, HP Discover, both in the US and in Europe. Frankfurt, Germany last year, and obviously in the US and Las Vegas. And we, again, all the action in Europe here live for HP Discover. I'm here with Dave Vellante. I'm John Furrier. Again, Dave, a continuation of our programming where we go out to the Advanced Extract, extract the scene from the noise. HP, our turnaround documentation of the company that is a great, huge player in the enterprise space. Obviously historic in its size, like IBM and big. But, you know, having some troubles over the past few years, certainly we've commentated on that. But, surprisingly, HP is making a turn. We're seeing Meg Whitman at the helm, yet to come on theCUBE, and we've got multiple invitations to her. She has yet to come on theCUBE. We'll keep on asking her to sit down with us. But, you're seeing some financial engineering going on. You're seeing some light at the end of the tunnel. Mid-endings, if you will, from the five-year turnaround. We are documenting deep inside HP, both at the top executive level, as well as into the trenches. The full documentation of the five-year turnaround now by Meg Whitman. Dave, I got to ask you your thoughts on HP Discover. Clearly, we're seeing cloud and big data at the centerpiece of this, and a lot of other things under the hood. What's your take so far here to kick off HP Discover? Well, thank you, John. It's good to be with you again here. So, the HP Discover vibe, you know, cosmetically is very similar to what you see for those of you who were in Las Vegas. The branding, the booth setups, and the like. Very spacious setup, a lot of activity going on at the booths. And the US show is actually a bit smaller. The European event is larger. I don't know what the actual numbers are, but I'm guessing it's north of 10,000 here. And the US sort of hovers between eight and 9,000, typically. So, there's more customers here. There's good vibe, strong vibe. HP always has a big presence in Europe. I think it's turning to HP, John. HP now is a $112 billion company with about a $53 billion market cap. So, it's still way underperforming where it should be. A company like HP should be having at least one X revenue from a valuation standpoint. Ideally, I'd like to see 1.1, 1.2. We're talking about 50 cents on the revenue dollar is what HP's trading at, but it's bumped up from that. It was actually worse. HP got itself into a big mess several years ago and Meg Whitman has been engineering a turnaround. She talks about a five year turnaround. We're through year two of that turnaround. Last year was HP's fix and rebuild year, John. And essentially what they were doing is really trying to focus on a couple of things. Improve their operating efficiency. Generate some free cash flow and pay down their debt. Some real serious X and O type activities from the balance sheet standpoint. They generated $9 billion in free cash flow last year. They've been paying down their debt. HP now is in a position to do, you know what guys like Joe Tucci call tuck in acquisitions. Smaller acquisitions that are more strategic in nature, much more like what we saw with Vertica, certainly not in terms of what we saw with autonomy. So smaller acquisitions that can help HP get back to growth. The other thing I want to say is we've said a number of times here in theCUBE, HP has to shrink before it can grow and that's exactly what's happening. The company is slowly shrinking. Major parts of its business units are the pieces of it are growing, but the declining pieces are declining more rapidly than the growing pieces. As a result, the company is shrinking. It was $120 billion, now it's down to 112 billion. John, my prediction is that decline is going to continue for the next couple of years before HP can really start to reverse that decline and start the growth engine again. Yeah, Dave, it's exciting. We are here in Europe live at Barcelona, Spain, obviously for the HP Discover conference. The most important event happening in the world this week. We are also covering two other events happening simultaneous to the HP event year. That is LayWeb event in Paris, France. We're covering that as well. As well as back in the US, we're covering Gartner data center conference. So we have our eyes and ears to the ground for LayWeb in Paris, which really is not as important as HP Discover because there's more action going on here in terms of what it really means from a dollar standpoint. But LayWeb is important, Dave, because it talks about the future of the web app market. You know, the web 2.0 market guys in the software, kind of like in the consumer marketing area. It kind of is a tea-leaving exercise around looking at what's trending in the, you know what I call the hipster programming market. So LayWeb is really kind of not as important as HP Discover. Moreover, I think one event we wish we could be at, unfortunately we don't have the ability to bring the cube to, that is Gartner data center conference, which is a very important event because Gartner's top coverage around the data center is being documented this week. We're certainly going to be covering that. We're doing a crowd chat at seven o'clock here in Europe time, which will be going simultaneous in the US around Gartner. And here's what's happening. You've got the data center around the Gartner symposium happening, which is really critical around the future of the data center, which is about cloud, mobile, big data applications. And you've got HP Discover on a financial turnaround, Dave, where they are about to make their product move, not yet impressive in my mind on the product side, certainly more impressive on the financial side was as they straighten out their kingdom, if you will, get the numbers right, get all the finances in order. They're a huge battleship that's turning very slowly, throwing off a really big wake. Obviously the financial performance is really important with that. So again, exciting week for theCUBE and our team at Silicon Angle and Wikibon we're covering HP Discover here live, Gartner symposium, Gartner data center conference in the US and lay web in Paris. So we're going to have all that coverage, keep watching us here. So Dave, given that, a lot of activity going on. Let's talk about HP. Meg Whitman just announced on her earnings call about the turnaround. You saw a dividend, you see the share buyback. You're seeing the cleaning of the house, if you will, cleaning up kind of the first room that needs to be kind of rearranged is the financial performance of the company, which obviously is driving everything. It's clear to me that Meg Whitman has her 100% attention focused on the financial performance. So I want to get your take on that. One, your analysis of the financial performance. And two, they're not showing excellent numbers on growth. I mean, are they doing it right? I mean, certainly having better numbers is a nice sign of health, but are they reporting their business properly? I got to ask you, because you look at Amazon, has a profitless business in the AWS, yet they don't report the earnings the way they do. They package their growth, but I want to get your take on that. Do you think HP is packaging up their financial performance properly? Do you think that's a work area of improvement, or do you think they're okay? I mean, I'm not showing any growth in any of their business units. What's your take on that? Well, I think you're right. I mean, I think, again, this year was one of generating free cash flow and paying down debt. They still got, I think, roughly $16 billion in long-term debt and $12 billion in cash. You'd like to see that ratio reverse a little bit, but to your point about how HP reports, it's got one of its business units that it reports on at the top level that is actually growing, and that's the enterprise group, which actually had been struggling because of some of the difficulties within ISS. It's growing about 1.8%. That's the enterprise group, and it's the only group within HP that HP reports at a high level that's growing. Now, it's got pockets of growth, and for instance, the converged infrastructure group is growing at 40 plus percent. So what I would like to see, John, is HP, just exactly to your point, I would like to see HP package the way it reports differently because when you tick through printing and personal systems, it's half the business, that's declining at 1.2%. I told you the enterprise group's growing at 1.8%. Enterprise service is down 9%. Software down 9%. HP financial service is down 5.5%. What I would like to see, what you alluded to, is package that differently. Show me, do what IBM does, do what EMC does, package up cloud converged systems, all the high growth stuff, and track that so that I can see the progress of those areas where HP is actually shifting its business. And so I think that it needs a different prism, and who knows, maybe it even needs a different organization. I don't think it does. So what I would do if I were HP, I would reorganize the reporting structure and the structure underneath to demonstrate those growth areas around cloud, around big data, and around converged infrastructure. Those are really the three big areas that I would focus on. And then obviously, they got to figure out mobile because that's the only way in which that PC line is going to grow. Now John, this is really your wheelhouse, right? When you think about the mobile space, you've been very outspoken that HP should not spin out or sell its PC business. And the reason why you've said that is it's a distribution channel for the future mobile business. What are your thoughts on what HP should do? Well, first of all, I think your assessment is right on the money and the financial. I think they need to package up in how they report their business to Wall Street. You know, they're serving two customers. HP in my mind serves two customers. They serve Wall Street and they serve their enterprise and their customer base. They have two sets of customers. People who buy their products and Wall Street who buys the financial results. It's that simple. Meg is clearly to your point working on one, and I think your advice is probably what she's going to do. I mean, if not, Meg Whitman, you should listen to Dave Vellante. I think he's got a good point there. On the product side, I think a different spin on it. One is, I think that HP needs to be relevant. And I think the first thing that they have to do is identify the markets that they want to be disrupting in and growing in. Right now, if you look under the hood of HP, I'm looking at the signage around me, storage virtualization and databases, software defined storage and entry data centers, Flex Network. I mean, they have in the enterprise group really, really good product offerings. Nice, sustainable business, nice products, relevant, but that's not going to be the power throttle that's going to grow the business. I think what HP and what Meg Whitman needs to do with their team is saying, look it, I need a breakout product. I need to have a relevant shiny pebble that people can see in the market. Just that makes HP relevant. I think that's mobile. I think HP has to have some sort of device. They're in the supply chain business. It should be a no-brainer for them to pump out some sort of device. Look how fast Samsung got to the table in Android. I think HP can do that. And I think HP needs a new product. If you go back in time of HP, you look at the history. During the late 80s, they were in a declining mini-computer business. It was the laser jet and the printing that broke them out into the computer products business. That product was a black swan. HP needs a black swan, Dave. They need something to come out of the woodwork of HP. They need a product that's going to be the flagship of the future HP. I think Meg Whitman has to get her arms around what that is from a holistic perspective that complements the existing portfolio of products. So one, a relevant product strategy. Two, making it real. So I think on the product side, it's kind of like status quo right now. You can see them not rocking the boat on that. And as we say in kind of the East Coast, the best move sometimes is no move. So I think HP really isn't making any moves right now. If you look at what they're doing, they're not making any power moves relative to the products. They're just continuing to point releases. They got some new stuff coming out. Obviously very compelling. We heard from about flex capacity with cloud. These aren't game changing products. These are incremental point releases to existing leverage of their product portfolio. To me, that's great. Keep that going. But they got to move the ball down the field in a big way. And I think I have not yet seen that from HP. And I honestly have no idea what's going on with HP in this area. I've been scouring the landscape, trying to figure out what they're doing. And there's really, I can't see anything. So I think in summary, the best move from HP right now that they're doing is not doing anything. They're not really doing anything. When we've talked in theCUBE, I've asked the question a number of times. Can HP get back to its roots? I asked this back in 2010, 2011 when we were doing Discover in Vegas. Can HP get back to its roots of Invent? Now it put Martin Fink in charge of HP Labs. Now Martin Fink's got a dual role. He's now also in charge of cloud. If you look at HP's R&D on the, I think John, you listened to the earnings call. Wall Street was given actually asking Meg about R&D spending. And Meg was, it was nuanced, right? She was saying, look, we're being coming more efficient on R&D spending. So R&D spending actually declined. Now that is to me a concern because under the herd era, he really cut R&D right to the bone. And as you well know, John, you can't just flick a switch and turn R&D back on. So HP's got to get back to its roots of Invent. The fact that it's lowering R&D is a bit of a concern. Now Meg's claiming that they're being more efficient on that, but they need to see some blockbusters coming out of HP labs. They talk about store wants. Clearly it's not a market blockbuster. It's doing well. It's helping HP compete in the marketplace, but that's not a game changer in terms of, like you gave the printing analog. Express Query, actually very interesting technology that came out of there. Vertica is the other thing, John. Vertica is probably the most interesting acquisition that HP has made, in my opinion. It's really starting to pay dividends. That was a great acquisition. They picked it up for, I don't know, 300 plus million, 340 million, something around there. That has allowed HP to develop the Haven platform and really participate as a genuine player in the big data business. Kind of competing not only with EMC and Green Plum, but also leveraging a lot of the stuff that we talk about in Hadoop. So I think I really, really like that Vertica acquisition. I want to see more. Meg's got to get this company into a position where it can begin to acquire some of those more innovative companies and tuck them into HP. We were walking over here, John, and you made the statement. People don't realize how big HP is. I mean, talk about that a little bit. Yeah, I mean, here's the thing, Dave. First of all, I love HP. We're critical of HP in some areas. We're very complimentary in others. People who know me know, sometimes can be harsh on HP because I'm rooting for HP. There are a lot of people that are rooting for HP because I'll tell you why. HP is a monster-sized company. They are not some small, we're going to pivot. They're a huge company with big numbers. They are the aircraft carrier. It's throwing off a huge wake of value, revenue, customer value, and it's hard to move on a dime. And Meg Whitman has essentially, hasn't set up the timeline short, like I'm going to turn around. So the turnaround in her mind is really just kind of get the ship vectoring in the right direction. That's my point about the product relevance and like she's doing with the financial engineering. So they have huge customer base. HP is so relevant and so important because of the size, Dave. And I think they get a lot of people bashing them. I read a lot of bloggers and other reports. Oh, HP sucks, HP's this and that. The bottom line is, yeah, HP has been hurting. But since we've been here with Meg Whitman on board, I got to say, the energy of the company is significantly different. There are still naysayers about her leadership in the market. But I'll tell you right now, from reporting here on theCUBE, since the autonomy integration, there's been a positive vibe. They've kind of eaten that bad food because they got a little stomach bug on the autonomy. So that's kind of digesting through the HP system, right? So once that's gone, but the technology is being integrated. So to me, you're seeing two things. They got a digest autonomy, they've done that. They've got to get the product's relevant. If you look at the financial performance of earnings, the laser jet division is sequencing to more of a network play. Like that direction, that's positive. Now you're seeing cloud. We've talked to Sarkile, we've talked to the folks on the cloud side. Cloud is getting it. They're playing in OpenStack. I think they could be doing more in OpenStack. I think HP could be what IBM was for Linux and be that anchor tenant and make OpenStack very real. And you heard from Scott Well of the GM of Technology Services that it's Amazon-like cloud for the enterprise and what they're doing. So I think they are definitely moving in the right direction. I personally think the size of HP is a good thing, but also a bad thing, doesn't give them the props that they get on the press. So I think overall it is moving in the right direction. I'm not seeing any negative signs on the direction, as we say directionally correct. So that's my take. What's your take? I want to add to this discussion and talk about one of the acquisitions that HP did make. John, in 2010 we were at VMworld. You remember the bidding war that was going on between Dell and HP and we of course accurately predicted it was pretty easy prediction that HP was going to win that. Even though HP had to pay $2.4, $2.5 billion for three par, that acquisition saved HP's storage butt, in my opinion. And more than that, it's been a home run for HP. So three par has been consistently, for years it was growing to triple digits. It's still growing at very solid, 60% plus growth rates. And so three par has been awesome. Now, autonomy, you mentioned autonomy, yeah, it's like a little stomach bump, but that is an asset. It's like a Banburrito as we say in California. That's an asset that HP has to absolutely leverage. Their software business, it declined 9% in the quarter and they said, well, that was because it was a tough compare because we had a big deal with GE. But if you take GM out of it, it's still declining. HP's software business has to grow. It's not right that HP's software business isn't growing. That is something that we're going to be talking about this week. I think Dave, everyone knows they overpaid for autonomy but I just want to end the segment saying this is that you can walk into a room and know if there's a good party or not. I got to tell you in covering HP for the past two years in depth since Meg's been on board and the prior regimes, it's not a bad party. You can smell success, you can smell relevance, you can smell and you could feel the energy of the employees and the customers. Again, HP is a hard company to describe, but in terms of challenges, I think Microsoft has more challenges than HP in my opinion, but that's a whole nother cube conversation, Dave. I got to tell you, HP is in a good position. I think I like the position, I like what they're doing, but again, I want to hear from the executives what is the next black swan? I want to hear where is HP going to be putting their growth, what's the growth driver for HP? Under the hood, they're looking good. I think they have nice sustainable product set portfolio right now, but where's the breakout product? What is going to be the flagship signal from a product standpoint? And that's something that we'll be watching day in, day out here. Three live days of coverage. This is the Q, I'm John Furrier with Dave Vellante. We'll be right back after this short break.