Hewlett Packard Enterprise Company (HPE) Earnings Call Transcript & Summary

Folks, thank you very much for joining us. This is Simon Leopold, Raymond James Data Infrastructure Analyst here at our virtualized Technology Conference. I'm pleased to welcome for our next session. We have with us from HP Enterprise, Tarek Robbiati, the CFO. We also have Andy Simanek on the line as well. Andy, you're muted and video is out, but I think you wanted to just make a quick opening comment before we dive into the fireside chat. Andy, do you unmute? Here you go.

Sorry, yes, I think, they were holding me offline there, but thanks, Simon, appreciate it. So before we start, let me just take a quick moment to read our disclosures. So you'll hear some forward-looking statements in today's discussion. These are based on risks and assumptions that are described in our annual report on Form 10-K and our quarterly report on Form 10-Q. Our actual results could differ materially, and we assume no obligation to update them. More details can be found on our website at investors.hpe.com and our recent Q4 earnings announcement, press release, dated November 30. So with that, Simon, let me turn it back to you.

Great. Well, thank you, Andy, and thank you, Tarek, for joining us. And folks in the audience, you've got the option to type in questions into the webcast. So I've got a window open here, so I can read those into the discussion, but I've prepared a few.

Tarek, I will apologize upfront for starting with supply chain. This is sort of the mandatory topic, as you know, but deservingly gets a few eye rolls as we dig into it. But I do want to make sure we talk big picture, long term. But let's knock this part out because I know people care. So last quarter, you reported order growth, I believe, 28% year-over-year, and you offered a sales forecast for 3% to 4%, not a unique dynamic, but how do you help us, sort of, square what's feeding into this order growth versus the revenue trends?

Yes. Well, first of all, Simon, thank you for having us on your conference today. Very pleased to be here with you. And certainly, no apology needed on our behalf for asking the right question on supply chain. So I'm delighted to have the opportunity to answer it. So what's important to understand is, why are we reporting or we choose to report on orders? Orders is, for our business, a lead indicator of revenue and revenue growth. But it's very difficult, unless you are in the company, to really determine how much of the orders truly materialize, timing-wise, in a particular period of time. And as part of the order numbers that we provide you, we have orders that may be recognized in revenue terms, much later than in the period in question. We have Pointnext orders in particular, who are involving contracts of 36 to sometimes 60 months. And therefore, the orders are just an expression of the revenue to come and the revenue growth to come. And the reason why I emphasize this point, is because people tend to infer between the difference between revenue growth and order growth, what the in-year or impaired backlog is going to be. I discourage you from trying to do that because you will -- you don't have sufficient information to be able to attest of it. But -- and any research that has been written to that effect and computing book-to-bill ratios, is making -- are making no sense, absolutely no sense because you cannot determine the timing of the orders that -- from your vantage point. Having said that, the point to take away is, in Q4, we had 28% order growth. And at the end of Q3, year-to-date, we had a 11% year-to-date order growth. So what does that say? That is simply pointing to the fact that we are anticipating a pretty substantial demand and that the momentum in the business, entering into fiscal year '22, is very strong. Demand has been very strong and it's been stronger at the end of Q4 than it has been at the beginning of Q4. At the same time, the supply and our ability to fulfill the demand, has gotten a little bit worse between the beginning of Q4 and the end of Q4. And we have foreshadowed for a number of quarters now, 5, to be precise. The fact that we will take a bit of time for the supply chain issues to subside. We have been buffering inventory, in anticipation of this supply crunch, and we will continue to do so, moving forward. As a matter of fact, we've added $1.9 billion of inventory on balance sheet to help navigate this difficult supply chain environment, that many other players in the industry face. All in, very comfortable with our revenue guidance for fiscal year '22, as a result of the very strong demand and our ability to navigate the supply chain constraints. And we stand by what we told you at SAM and where we reiterated at our Q4 results, which is that we are targeting 3% to 4% top line growth, on a constant currency basis, for fiscal year '22.

And when we think about the supply chain constraints you're facing, and I do appreciate the fact that they tend to change, what are the particular elements that are the biggest hurdles for you?

So it used to be -- supply chain constraints used to be confined to a few commodities. Now, it's broader than those few commodities. In fact, some of these commodities are demonstrating some signs of easing in their constraints, particularly DRAM right now. But at the same time, you have logistics challenges around the globe with cost of containers rising, expedite fees because manufacturing levels and manufacturing capacity is not at full capacity, worldwide. And so it's pretty much the combination of all those factors, the broad set of commodities that are constraints, the expedite fees and logistics that we have to manage and navigate. But so far, so good, no concerns.

And what kind of assumptions have you made for the duration of these challenges? In other words, when do you think things get start getting better or improve? And when do you think we're fully recovered?

Our best assumption is that by the end of calendar year '22, the world will be back to normal, but there are unknowns along the way, right? So it's everyone's guess what would be the impact, for example, Omicron on potential manufacturing closures and situations of the sort. So -- but for the moment, we feel that the supply constraints are going to ease towards the end of calendar year '22.

And I guess, your gross margin is affected by the supply chain constraints. But I'm also conscious that there are other variables at play around your product mix and the shift in the business towards as a service. So if we try to just focus on supply chain constraints, is there a bridge you can build to help us understand, perhaps in the most recent quarter, the impact on margin from supply chain?

So with respect to gross margins, it's -- the gross margin is obviously, the output of many decisions we make. And we've raised prices very disciplinarily. We're very disciplined in raising prices. We continue to drive higher growth in the higher-calorie parts of our overall company. And we also have to deal with the backlog orders, which have been priced at the level at the time that is lower than the prices we have today. So all these resulting impacts and particularly this mix between aged-older orders and new orders, is going to weigh a little bit on gross margins in Q1. And that's why we explained that in our -- during our Q4 earnings announcement. And it's possible that this extends into fiscal year Q2. However, we feel reasonably confident that gross margin, overall, will grow year-over-year, on a FY '22 over FY '21 basis.

And you mentioned you've taken some actions, in terms of price increases. And I'm sensitive to the fact that these are not instantaneous results, and who pays list. I guess, that's the other variable. So we're trying to get a better understanding of what's been the response of your customers? And what's your expectation for the time line of when price increases actually result in better financials or have an impact on your results because I imagine, it's not immediate?

Yes. So obviously, for the parts of our portfolio that are more differentiated, raising prices isn't impossible, quite the opposite because we can really justify the value and we've been raising prices in Aruba and other parts of our portfolio, in storage and elsewhere. We've been raising prices also in Compute, but -- which is a more commoditized part of our portfolio, and we've been very successful at doing that, with competitors following suit. At the same time, it's just the mix effect that I was referring before, between the old orders and -- that are coming at a certain gross margin and the new orders that are coming at a higher gross margin. That is, overall, triggering the impact on gross margin in compute and therefore, the rest of the company overall, given the size of our Compute business. But I want to reiterate everybody -- that to everybody that our Compute business is extremely profitable and very resilient. Not many members of our industry can prove the profitability of their Compute business. We feel very good about it. It contributed to a very substantial portion of our profits in fiscal year '21, and we'll continue to do so in fiscal year '22. We are targeting double-digit OP margins in Compute, which is very much something, we have demonstrated, we can do.

And I guess, to sort of wrap up this part of the discussion, I had the impression from the last call that you're maintaining a very high level of confidence in the full-year EPS forecast. What's giving you that confidence?

Yes. So we do maintain the guidance that we gave to the market. No change to the full-year '22 guidance of $1.96 to $2.10. There are many reasons why we feel this is the case. Well, first of all, the parts of our portfolio -- the growth parts of our portfolio will continue to grow and deliver calorie revenues, which come at high margins. And therefore, this is one of the reasons why our operating profit will grow. We are starting to turn the corner in our storage portfolio as well, which is showing some very solid sign of growth in our own IP types of products, and that will take hold in fiscal year '22. The economics of Compute are under control and improving. We feel very comfortable about that. Also, our cost optimization and resource allocation program is driving higher level of productivity and efficiencies across the portfolio. That is also one source of the operating profit growth. And all in, the guide that we gave you of $1.96 to $2.10, is perfectly achievable, from our standpoint right now, absent changes in the environment that if we were to witness, we obviously communicate, but I feel comfortable about our EPS guidance. It also underpins our free cash flow guidance of $1.8 billion to $2 billion. That itself is a function of the earnings growth and the pretax earnings growth. And also, the fact that our restructuring programs are coming to an end, and we anticipate lower restructuring costs in fiscal year '22 than they were in fiscal year '21 and probably disappearing or next to nothing restructuring costs in fiscal year '23, following the termination of our restructuring programs of the past. So our free cash flow guidance that we gave you for the next 3 years of $6.5 billion to $7 billion, is something we feel very comfortable about as well.

And the other sort of macroeconomic question I wanted to ask you, before drilling into the business, is what would rising interest rates mean to HP Enterprise? And I guess, I think about, particularly your financing business as an element to that.

So money-over-money business is like our financing businesses, do very well in a rising-interest-rates environment. We simply manage the spread, and that spread is actually better justified in a rising-interest-rate environment than in a low-interest-rate environment. But still, we do very well with our HPFS business. It's been demonstrating extremely solid performance and very strong resilience. Remember that, Simon, when we were, just 18 months ago, in the middle of the pandemic, people were questioning the resilience of that business and its ability to withstand losses. Nothing has happened, as we were confident then, we are even more confident today. Bad debt losses in HPFS are extremely contained, and the return on equity of that business is well north of the 18% that we were targeting at SAM 2021. So rising interest are -- interest costs are good for our Financial Services business. And with respect to the rest of our operating company, we have fairly modest leverage at this stage, and we feel, therefore, comfortable that we can take on an increase in interest rates, should that increase materialize. I've got to say to you, and you probably have your own views and feel your own way about this, we can't be at a level of 0 or negative interest rates forever. It's about time that interest rate rise, we got probably, accustomed to this environment of 0 to negative interest rates for way too long. Inflation is not a bad thing, as long as it is not getting into points of being out of control. But that's certainly, we're far, far, far away from that. And we just want to make sure that if interest rates happen, we can anticipate on them in the way we price our products and services, and we feel we can.

If you saw my personal account, you'd know my bets with what you're describing. So you're preaching to acquire, in that regard. But I want to pivot to, sort of, now the business trends. And in particular -- and I've said it to this because it affects my entire coverage , this belief of public cloud adoption. So I'll turn up the contrast that nobody is going to invest in on-premise IT infrastructure, everything is ultimately going to the public cloud. And therefore, why would I invest in HP Enterprise? That's the bear argument. How do you counter that? What's your view on what are the real long-term trends as it relates to on-premise investment versus public cloud adoption?

So look, the world is never black and white. I mean, if history teaches something, is that it's never one or the other. The whole -- there's all sorts of reasons why we don't believe that the world is going to go entirely in the cloud. Well, first and foremost, data becomes more and more the most valuable asset of any enterprise. And as enterprises extend themselves, there will be more and more data. As enterprise extends itself at the edge, there will be more and more need for processing data at the edge and making sure that data that is [ perishable ] that has been generated at the edge is disposed off and the meta data transferred back to a private cloud or public cloud, for that matter. So as companies understand the importance and the value of that data, they will want to make sure that, that data is under their control. Sovereignty of the data is very, very critical for our customers, and they are not willing to let that data be just somewhere that they don't know where. And they certainly, don't want to face the egress costs back on bringing the data from the public cloud onto their on-premises environment. The second reason why we don't believe that the world is going to be dominated by clouds. It's going to be a hybrid world, is performance. There are simply, some applications that cannot run back and forth to the cloud, for latency reasons. It's just unrealistic to predict that they do so. In fact, we have -- I'll give you one example of customers' annuity, which is an automated vehicle company in Sweden. They generate for every vehicle, an incredible amount of data and they cannot get that data process in time to give instructions to the vehicle, to be actually performing what it needs to do with the right level of latency or acceptable level of latency. So data sovereignty is one reason. The second reason is performance. The third one is cost. And cost, if you look at plenty of companies, they are realizing that the cloud thing is there, and they have to get their costs under control. And this is why, in our strategy, we've promoted GreenLake as being the cloud that comes to you. We take the good aspects of the cloud, which are all around a simple experience. And we make sure that we address the concerns that our customers have with the cloud, about data sovereignty, cost and performance, by effectively creating a solution that they have entirely under their control and that we manage on their behalf. So why would you invest in HPE as opposed to invest in the cloud? Well, first, I would invite you to look at the trends I just referred to. Second, also, there is -- as investors, you need to look at valuations and where we're trading and where other players are trading. But I leave you with your own considerations, in that regard. We feel, at this stage, that our as-a-Service story is not given much credits, although we have more ARR than many other players, who say they have ARR. Our ARR is growing extremely fast, at 35% CAGR, and it will continue to do so for the next 3 years. We have more than $5 billion of total contracted value on our balance sheet with customers, which will unwind over the next 2 to 3 years. And our ARR is improving in profitability terms, too, because we're adding more and more software into it. And we committed to the market that our ARR will grow from being a mix of 60% of software and services today to more than 75% in 2024. So it's a trend, the trend that we're navigating. The as-a-Service on-prem trend is a very solid trend. It's here to stay, and it's becoming richer and richer in margins. So that's why you should look at HPE.

And if we think about this as-a-Service pivot, which you've been doing for some time now, and I don't even want to guess how long it's been because I forgot. But your peers have, sort of, jumped on board, and we're hearing some similar narratives. So help us understand a little bit of how GreenLake is different from the competition and how it's dissimilar from leasing?

Yes. So leasing is a fairly simple payment mechanism, whereby you pay for one item over time. GreenLake is a full-services offering that allows you to turn on and off, at will, the capacity of the solution that is powering your infrastructure and pay for that, over time, pay for what you consume, over time. It is also coming in with a bunch of tools that allows you to truly measure the consumptions of your IT resources, as a result, and expand them as you see fit. It's coming in also, with a services wrap, where we take care of monitoring and automating the deployment of workloads on GreenLake infrastructure. So it's a very rich as-a-Service offer that today has very few comparables in the marketplace. And yes, you're right, there's a bunch of competitors, who are attempting at copying GreenLake, but be aware of the mutations. This is not as simple as saying, pay for things over time. There is a lot more science and technology and software solutions that make up a GreenLake solution to be able to be called GreenLake or anything like that.

And maybe, now pivoting to the business units, the product side. So let's look at the compute storage elements first. How are you thinking about the outlook for calendar '22, relative to the longer-term forecast you gave us at the analyst event recently?

So specifically for Compute, we feel good about the 11%, 13% margin guidance that we gave at -- currently, Compute is impacted by supply chain tightness. We talked about that. But as we shift the mix of our business to more profitable segments, where we are better differentiated and also grow our GreenLake-as-a-Service mix, which contributes to Compute, we will see the path to the margins I've just referred to. And so when you think about this business as a mature business, we feel it has still room for improvement, in terms of profitability terms, and it hasn't finished from surprising us positively. With -- insofar as Storage is concerned, it's also a mature business, but we are growing more the differentiated IP products and solutions that we have, our own IP products and solutions. So we'll be driving a strategic mix shift away from lower-margin third-party resale. And right now, our Storage business is pretty profitable. But we're going to turn that profitability story to be a growth and profitability story in fiscal year '22. And we started to turn the ship back at the end of fiscal year '21, and we are very confident we have a great opportunity ahead of us in Storage and data, given everything we said about explosion of data in -- that's happening right now.

So let's shift to the -- within Compute, you have a subsegment high-performance compute. And that had some good growth last quarter, but it wasn't quite where we thought it would be. And I know there's some unique characteristics to that line of business. So could you help us understand why, maybe, 2021 didn't play out exactly as you expected and where we're going from here, in terms of reaching the longer-term targets for growth, in that unit?

Yes. I mean, we posted a pretty good Q4 with $1 billion of revenue in HPC and AI, up 35% quarter-on-quarter, which is very solid. We had planned for at least 8% growth last year. We had some major contracts that are subject to customer acceptances, slipping into fiscal year '22. But the order book is stronger than ever, at $2.7 billion. This figure of $2.7 billion excludes another $2 billion from an NSA contract that we won late in 2021. We are still on track to average 8% to 12% growth between last year and this year, and we've laid out a plan to grow better than the market growth of 11%, over the next 3 years. So the point here is, the market is very healthy. Demand for sale systems are -- is rising and getting many of the headlines. And so we feel that we are extremely well positioned with the assets that we have, to capitalize on that demand. Margins will be lumpy as we recognize the revenue, but that's fine. That's the nature of the business. But when the business is lumpy up, the margins will eventually reach the mid-teens, and we feel comfortable about this forecast. And if it's not lumping up, then the margins will be in the upper single digits. So it's a business that has its own characteristics, as you said, Simon. We're investing in it, and we feel that it has a lot of attractiveness because not many people can compete with us. We're very well positioned and the demand there is very strong.

So I've gotten a question from the portal that I think is in the context of your Compute business overall, in the on-premise investment. But it's the idea that organizations, enterprises are constrained on bandwidth and latency. And this may present some opportunities for on-premise or edge applications. You could talk a little bit about how you see those as opportunities for HP Enterprise?

Yes. I mean, that's what we touched upon it before. Performance and latency is very critical for some industries. And also, you've got to put some compute power, where the data is generated. There is a lot more data generated at the edge, and it is simply not possible or economically possible or worthy to actually have the data travel all the way back to the cloud or a private data center to be processed. So we see a lot of opportunities with this distributed world that requires local data processing with low latency. And this is why we feel very good about our strategy, which is centered around data, cloud and the edge, exactly for that reason, which is that the data is everywhere. And you need to process it and store it economically, in an environment under your control, making sure that in doing so, your applications can perform in a way that is actually in alignment with your latency needs that you have.

Now shifting to your Intelligent Edge business unit. I had a sense that you suffered maybe a bit more from supply chain constraints than some of your peers, and it changed versus prior quarters. So in the most recent quarter, there seems to have been a bit of a shift from what you experienced earlier in the year. What happened?

Look, I would say, if you look at the performance at the edge, in the fourth quarter, we grew 2.7%, but this is after we decided to sign a very large 5-year deal with a massive U.S. retailer for taking over the entire network environment and turn this into a Network-as-a-Service environment. So that deal in itself cost us 800 basis points of top line growth and about 500 basis points of margins. Having said that, we did experience probably more supply chain constraints at the edge and in other parts of our business. But this has led us to finish fiscal year '21 with more than $4 billion worth of order. And we feel very good about our ability to capitalize on that order book at the edge. Because remote work, security, people upgrading to Wi-Fi 6, digital transformations are the drivers that our customers are talking to us about, and we feel very comfortable about the prospects -- growth prospects of the edge in fiscal year 2022.

So the edge and campus environment is pretty crowded and maybe only getting more crowded. But I think, you've expressed the intent not just to grow but to gain market share. Can you talk a little bit about why you're confident in your ability to do that?

So we have a unique platform in Aruba that is giving us great confidence that we're able to grow Aruba and capture share. Wi-Fi deployments at-scale or off-scale are not easy to make work properly. And that is because Wi-Fi is not a technology that is particularly optimized for interferences, unless you have something in the back end that make the various access point work properly. The platform that we have built is absolutely essential for scaling up large Wi-Fi installations. And that's what Aruba is proud of doing, and we feel very comfortable that we can leverage that platform. In addition, we can leverage that same platform with Silver Peak to connect various branch and campuses that our customers have. And we feel very good about the prospects of Silver Peak plus Aruba, in a context where the enterprise is becoming ever more distributed. So our plan there is to continue the growth and taking share, leveraging this unique platform that we have called Aruba Central.

And you recently announced a partnership with a private company called Pensando. Certainly, what's intriguing is that the pedigree of the team there, successful with one of your competitors, and yet they've aligned with you. Maybe, talk a little bit about how you think about the prospects for that? What do you -- I don't want to make a mountain out of a molehill, but if there's a mountain there, I want to understand it?

Yes. So we talked a moment ago about distributed-networking architectures. And if you think about that, within data centers, the more mundane tasks such as managing security or load balancing, have been very much centralized, so far. But the larger the data center gets, the more the structure creates volumes of East-West traffic, right? Traffic between data centers, traffic between branches and data centers. And if you were to consider security throughout the data center, if you were to consider how to reduce East-West traffic, then you have to envisage a different type of solution that makes a data center environment or a distributed-networking architecture more efficient. And that's our partnership with Pensando, and it's early days yet, but I feel that John Chambers and his team are on to something, and we're very, very glad to be investors in Pensando. We feel that it's not just about the financial investment, it's a strategic alliance that we have there to attack the problem of this ever-growing distributed-network architecture.

And I want to give you a chance to talk a little bit about your JV partnership, HPC. But let me, sort of, preface this with the idea that we probably have people in our audience, who are relatively new to HP Enterprise and may not know exactly what we're talking about, and then folks who are probably deep in the weed and looking for an update on the status. So how do we catch folks up on the importance and position of HPC, which -- within the business model?

So HPC is a very important part of our operation. We have substantial government rights over a joint venture in China, called HPC, for which we own 49% -- 49% interest. The rest is owned by a listed company called Uni-Splendor, who owns 51% of HPC. So if you really want to judge the performance of HPC, it's publicly available for you to see, by just looking at the accounts of Uni-Splendor, was listed in China. China is the second largest IT market in the world, but it is the fastest-growing market. And many multinationals have attempted to gain a foothold in China. They got, probably, a toehold and they're losing a lot of money out of that little presence that they have. We've been making a substantial amount of money out of our investment in HPC. And the value of our stake continues to accrete. Last year, we realized $257 million of operating profit booked into our OI&E line out of HPC, that is our share, and we collect regular cash dividends back up, over here, in the United States from HPC. We have a put option that expires in May 2022 that we can effectively sell our stake, if we wish to do so, at 15x trailing 12-month earnings. So if you do the simple math, 15 x $257 million, then you realize how much our stake is worth. The $257 million is the proportion, obviously, of the total earnings of the company, is a 49% proportion. The business is, obviously, much, much bigger than that. And it continues to grow. It's a very ambitious company. It's extremely well positioned in China. And we feel that ourselves benefiting from this very solid performance in our OI&E results from HPC. By way of an update on -- for those who are following the situation, Uni-Splendor is owned by [ Unigroup ], which is a large conglomerate that was managed by [ Xinghua ] University in China, which is undergoing a recapitalization program. This recapitalization program is currently underway and well advanced. We're monitoring the situation every day. We're in close contacts and we have very good relationships with the administration group of [ Unigroup ]. And we feel that they probably, are close to selecting or very close to selecting a final bidder that will effectively reinject a fresh amount of capital in the overall [ Unigroup ]. The crown jewel of [ Unigroup ] is HPC. That makes the vast majority of the value of Uni-Splendor and then, therefore, [ Unigroup ], the parent of Uni-Splendor. We are working very closely with the bidders as much as we are working with the administrators of the recap of [ Unigroup ] and believe that there are two possible outcomes for us. One is to extend our puts at a possibly -- on better terms in the future, for the future or if failing that, exercise our put on the existing 15x multiple, based on a trailing 12-month of economic interest. So it's only good for us, either way you look at it. I'd like it to be the better outcome. My preferred choice would be to be able to secure a longer relationship in China because the market continues to grow. And strategically, it's difficult to get back into China, once you've exited it. But so far, so good, and we'll keep you up to date about any new development we'll have, with respect to our stake position and the puts option.

Appreciate that. I want to touch on a free cash flow question before we run short on time. You did mention the forecast for the fiscal year at $1.8 billion to $2 billion in fiscal '22. Maybe help us understand, what are sort of the key sensitivities that could either allow you to exceed that range or to come short? What are you watching the most?

So operating profit is, of course, the largest driver of free cash flow. We have great confidence in our ability to grow our operating profit year-over-year, for several reasons. One, the demand is there. Two, we have changed and made investments in our salesforce to capitalize on that demand. And so now, we have our salesforce really humming and capable of triggering a substantial amount of orders than before. And three, we have a very large book order -- backlog book order that we can capitalize on. So these three things, execution, essential demand execution on the backlog, are giving us comfort around our ability to grow operating profit. The second most important element of free cash flow growth is a reduction in restructuring charges. These have been high for a few years. They're getting lower in '22 and will be quite low in fiscal year '22 -- '23. So I feel comfortable about a $1.8 billion to $2 billion guidance in '22 and very confident about our $6.5 billion to $7 billion free cash flow cumulative, over the next 3 years. Within that, you also have a little bit of working capital implications, of course, given what we spoke about before, with respect to inventory. We continue to be building a little bit more of inventory buffering. That would be a bit of an offset to free cash flow in the working capital part of the equation. But we've taken a decision to buffer inventory to gain more control of our supply chain. And so eventually, that inventory positions that we'll have, will get to unwind, but we're a few quarters away from that.

Great. Well, we're just a bit over time, and I like to close these sessions with an opportunity for you to hammer home, maybe a couple of key points here, as to what do you think is the least appreciated aspect of HPE story in the stock?

I think, there are several aspects that are the least appreciated in our stock, I can singling out to one. First and foremost, we are not getting credit for our as-a-Service transformation. It's ridiculous that we have $795 million of ARR and $5 billion of total contracted value, and very few people are spending the time to ascribe a value to that. The second aspect of our business that we don't believe we're getting credit for, is the strength and performance of our Compute business. It's been remarkably resilient, in financial terms. And we're focusing that business on value share, not market share measured by units. And when you measure us on value share, we take a disproportionate portion of the value of the entire industry in our Compute business. That's the second one. The third one that we don't get any credit for, is our stake in HPC and what I just mentioned to you, with respect to that stake. That alone, you do the math, 15x $257 million. It's fairly straightforward what this is worth. And therefore, by consequence, what the core trading multiple would be, once you back that out from the current trading multiples, at which our share price is reflecting. We still feel that Aruba has a way to go. Aruba has a lot of potential ahead of it. And finally, I'll finish by saying, watch Storage. Our storage story is just unfolding, and we're very optimistic about it for the future. So these are the 5 points. ARR and as-a-Service pivot; two, the strength of Compute, don't underestimate that; three, HPC. Aruba has long ways to go. And Storage, the story is just unfolding.

Well, that's great. That's perfect. You've written my note for me. So thank you. So Tarek, I appreciate it. Andy, thank you for joining us as well. So with that, this is Simon Leopold of Raymond James, signing off on our session with HP Enterprise. Thanks for joining us.

Thank you, Simon. Thank you for having us. Have a great day.