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

Hello, and welcome. I'm Pat Russo, Chair of the Board of Hewlett Packard Enterprise. Thank you for joining us this morning for HPE's 2024 Annual Shareholder Meeting. The meeting is now called to order. Today's virtual meeting format is accessible to all shareholders around the world and allows you to participate, submit questions and vote your shares online prior to the polls closing. Joining me today are Antonio Neri, President and Chief Executive Officer, who also serves with me as a director; and Dave Antczak, General Council and Secretary. My fellow Board members and HPE's executive officers as well as representatives from our registered public accounting firm, Ernst & Young, are participating in today's meeting and are available to answer questions as needed. Today, I will briefly share some comments about the Board's view of HPE's progress and plans. Then Dave will review the rules and conduct of the meeting as well as administrative items. Next, Antonio will provide an update on the company's strategy and offer insight into how HPE is delivering value for shareholders. We'll then respond to several of your questions that were submitted prior to today's meeting. You may submit additional questions through the text box on your screen. Your questions are important, and we will answer as many as possible during today's session. Following the meeting, we will post responses to all questions on the website annualmeeting.hpe.com. Before I turn it over to Dave, I would like to share my reflections on HPE's performance over the past year. The company's strategy is focused on the growing markets in AI, hybrid cloud and networking that are extremely relevant to today's worldwide enterprise customers. We believe HPE will continue to capitalize on market expansion opportunities that will help it fuel growth and create value for shareholders. Over the past year, AI has hit a critical tipping point, becoming a transformative force across sectors. HPE is strategically positioned to capture customer demand with its comprehensive AI offering. Customer demand for HPE's growth engines in networking and AI as well as the HPE GreenLake platform accelerated revenue and profit diversification in fiscal 2023. And we congratulate Antonio and the leadership team for HPE's 2023 performance, delivering the highest annual revenue in 4 years as well as record-breaking non-GAAP operating profit, non-GAAP diluted net earnings per share and free cash flow. HPE is accelerating its strategy with the planned acquisition of Juniper Networks. In evaluating this transaction relative to other potential actionable opportunities, the Board and the leadership team were highly focused on properly exercising their fiduciary duties to act in the best interest of all HPE shareholders to maximize long-term sustainable value. Through diligence, it was clear to the Board that acquiring Juniper is a strategically and economically compelling opportunity that will allow this company to evolve the networking market and provide customers and partners with an industry-leading networking portfolio. Once closed, this transaction is expected to be transformational for HPE and the industry more broadly as it changes the dynamics of the networking market and helps balance the company's portfolio even further to higher-margin businesses in the long term. The Board firmly believes the proposed acquisition of Juniper will maximize long-term shareholder value. HPE has not only achieved admirable financial results this past year, but maintained its commitment to operating under the highest standards of business conduct and corporate governance, which are essential to running the business efficiently, serving shareholders well and maintaining the company's integrity in the marketplace. We welcomed Bethany Mayer to the Board in 2023. Bethany has deep technology expertise that's of significant value to the company. She served as an executive adviser to Siris Capital, a private equity firm specializing in technology investments since 2018, and she brings great networking debt. I'd also like to thank Dan Ammann, President of ExxonMobil Low Carbon Solutions, for his service on the Board since 2015. Dan has made a personal decision not to stand for reelection. And so on behalf of the Board, we thank Dan for his many contributions. We [ offer proactive ] approach to Board-level succession planning and maintain an active pipeline of potential directors who offer diverse skills and perspectives. At the end of '23, the Board included 12 independent directors with a broad range of knowledge, skills and expertise. More than half of our Board is gender and/or ethnically diverse with unique skills and perspectives that enrich the Board's oversight of HPE's long-term strategy. In closing, I would like to confirm that the Board has great confidence in HPE's leadership team and their ability to drive further shareholder value from the many exciting opportunities ahead. Antonio and the Executive Committee have simplified the company's operating model, prudently managed costs and made sound investment choices that have helped HPE's portfolio continue to transform. There is more to do, there always is. But we're confident in leadership's ability to continue HPE's transformation to a more diverse set of businesses with heightened growth and profitability potential. So on behalf of the Board, let me thank you for your ongoing support as a shareholder of HPE, and we thank you for joining us today. Now let me turn things over to Dave. Dave?

Thanks, Pat. Welcome, everyone. This morning, I'll walk through the meeting logistics and the proposals to be voted on. And then you'll hear from Antonio, followed by a Q&A session. HPE's agents have certified that notice of the meeting was provided, starting on February 21, 2024, to all shareholders of record as of the record date for the meeting and copies of those certifications are in possession of the Secretary. I therefore declare that legal notice of this meeting has been given. Today's meeting may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties, including those described in our Form 10-K for fiscal year 2023. In addition, the information presented at this meeting may include references to amounts that are expressed on a non-GAAP basis. Throughout this meeting, references made to revenue growth rates, unless noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency. A reconciliation of such non-GAAP amounts to GAAP and other information relating to these non-GAAP measures is available on our Investor Relations website. Now the company has appointed Kris Veaco of the Veaco Group to serve as our Inspector of Election for this meeting. Kris is participating in the meeting live online today and as required by law, has taken and signed an oath as Inspector of Election. This document will be filed with the minutes of this meeting. We will conduct a question-and-answer session later in the meeting prior to the official closing of the polls. You should be able to see on the virtual meeting portal, there is a text box where you may submit questions. Please feel free to submit questions at any time prior to the end of the Q&A session. We will answer questions that we receive in connection with today's meeting. In the interest of time, we will address unanswered questions on the website annualmeeting.hpe.com after the meeting. The Inspector of Election has informed us that a majority of the outstanding shares held of record and entitled to vote as of the close of business on February 12, 2024, the record date for this meeting, are represented at the meeting. We therefore declare that there is a quorum present and that we may proceed with the business of the meeting. Please remember that you may vote your shares online any time during the meeting prior to closing of the polls. This morning, we have 5 proposals for you to consider, which were all described in HP's proxy statement for today's meeting. The first item is the election of directors. The following 12 individuals have been nominated to serve on the Board of Directors and will be voted upon today: Pamela Carter, Frank D'Amelio, Regina Dugan, Jean Hobby, Ray Lane, Ann Livermore, Bethany Mayer, Antonio Neri, Charles Noski, Raymond Ozzie, Gary Reiner and Pat Russo. The biographies of the 12 directors are available in the proxy statement for today's meeting, if you'd like to review them in detail. The Board recommends a vote for each of them. The second item is the ratification of the appointment of Ernst & Young LLP as HP's independent registered public accounting firm for fiscal year 2024. The Board recommends a vote for this proposal. At this time, I'd like to acknowledge [ Maureen ] McKenna, representative of Ernst & Young, is participating in today's meeting online. The third proposal is approval of the increase of shares reserved under Hewlett Packard Enterprise's 2021 Stock Incentive Plan. The Board recommends a vote for this proposal as well. The fourth item is an advisory vote on HPE's executive compensation. The Board recommends a vote for this proposal. The fifth and last item is the approval of the certificate of amendment to the amended and restated certificate incorporation to limit the liability of certain officers as permitted by Delaware law. The Board recommends a vote for this proposal. We will address questions during the Q&A session later in the meeting. In the meantime, I encourage shareholders to submit any questions online in the text box on your screen. Now that you've heard about the 5 items that you've been asked to vote on, we will proceed to voting on those items. It is 11:11 a.m. Central Time, and the polls are open for voting on each of those 5 proposals. If you've not yet voted or wish to change your vote, you may do so by clicking on the voting button on your screen and follow any instructions that are there. Shareholders who have sent in proxies or voted via telephone or internet and do not want to change their vote, do not need to take any further action. As you're making your voting decisions, I'll turn it over to Antonio to provide some highlights of the past year at HPE as well as an overview of our go-forward strategy. Antonio?

Thank you, Dave, and thank you, Pat. Good morning. Good evening. Thank you, everyone, for joining us today. We are at the forefront of a new era in the IT industry, with AI creating an inflection point that will transform the world. Through years of hard work, we have set our company on the right trajectory to capture the significant opportunity this era presents us. I am proud to lead HPE through this time of extraordinary innovation. In 2023, we advanced our Edge-to-Cloud strategy and generated record performance against key non-GAAP financial metrics. I am very proud that we had the right vision at the right time and that our team members around the world have been agile, resilient and bold to enable us to achieve it. We have confidently transformed our company, and we are well positioned for continued success this year and beyond. Today, I will touch on 3 key areas: our financial performance and how it is generating value for our shareholders, the ways that we are capitalizing on market trends, specifically in AI, and our success in driving performance through sustainable, responsible business practices. HPE has been successfully deploying our strategic [ people ] to higher-growth, higher-margin markets since the beginning of fiscal year 2021, which has created a strong value for HP shareholders. Over the last 3 years, we strategically refocused our portfolio for long-term profitable growth. We have seen an immense progress in advancing our strategy and differentiating our portfolio. From fiscal year 2021 to the end of fiscal year 2023, HPE generated 96% total shareholder return, which is much higher than the S&P 500 over the same period. And with a higher profit and stronger cash flow we are producing, we returned $11 [ billion ] to HPE shareholders through dividends and share repurchases from fiscal year 2018 to -- through fiscal year 2023. Our disciplined capital allocation framework allow us to return 98% of our free cash flow from this period while continuing to invest in our business. We delivered record financial performance in fiscal year 2023 against key non-GAAP financial metrics through strong execution. Specifically, our non-GAAP diluted net earnings per share and free cash flow were the largest ever in our company's history. We increased revenue for the third straight year, growing revenues 5.5% year-over-year to $29.1 billion, above the midpoint of our guidance. We delivered record gross margins that exceeded 35%, up more than 350 basis points over the last 3 years. And we closed fiscal year 2023 with more than $1.3 billion in annualized revenue run rate, a substantial increase of nearly $370 million from the previous year. This impressive set of results prove that our differentiated Edge-to-Cloud strategy is working and is very well aligned to customer demands and market trends. HPE is capitalizing on distinct and significant megatrends across AI, hybrid cloud and networking to deliver value for our shareholders. The AI market is exploding at a rapid pace, and HPE is very well positioned to be a leader in driving innovation and value creation for enterprise customers. Customers are realizing that they must embrace AI to improve business productivity. HPE is very well positioned to help them address their needs with an end-to-end portfolio. We designed our AI portfolio across the full AI life cycle, spanning large-scale AI model training, fine-tuning and inferencing. We are capturing the demand for AI systems with a large pipeline growing across AI use cases. Our pursuit of an outsized share of this market opportunity will deliver real value to shareholders for the years to come, especially with our investments in our unique silicon, software services and sustainable data center capabilities. At it's core, AI is fundamentally a hybrid cloud [ workload ], as customers need to influence data at the edge of the network, where the majority of the data is generated. HPE is a pioneer in hybrid cloud, and we are helping customers intentionally make their IT environments hybrid by design, to best support all their workloads, including new AI workloads. HPE GreenLake is at the heart of a hybrid cloud strategy and offering, and its growth is truly remarkable. The HPE GreenLake platform now connects 3.8 million devices and systems that support more than 31,000 customers -- customer organizations. We are seeing tremendous customer partner adoption of the platform for a value -- with a value proposition that's really resonating today. This helps us create significant shareholder value by expanding beyond infrastructure into new higher-growth markets, including software and services. Our recurring revenues have been growing faster than the public cloud, for example, and we are advancing our software- and services-rich portfolio. Recognizing the strategic importance of this market and our differentiated value proposition led by HPE GreenLake, we created a new hybrid cloud business unit. Establishing this new segment reflects the maturity of our offering and sets us apart from our peers. At the edge, our broad portfolio delivers security-first networking. We are continuing to build on the successes of our core networking business with expanded innovation in security, private 5G and data center networking. Our Intelligent Edge business is a primary example of what HPE can do to maximize future growth with the right investments at the right time. Since I became CEO, we have invested more than $6 billion in our HP Aruba Networking business organically and inorganically. Networking will become the core foundation in connecting the AI and [ cloud-related ] worlds, and that belief has paved the way for the acquisition of Juniper Networks. We believe now is the right time for HPE and Juniper Networks to come together to build the best networking business on the planet, with AI market inflection point being one of the key drivers. Once we complete the regulatory process and close the transaction, I believe we will become a new networking innovator by deploying an AI-driven networking fabric and operations from Edge-to-Cloud with a customer-centric approach. This transaction is expected to double the size of our networking business, making it a core foundation of HPE. Combining these businesses will provide customers with a truly comprehensive modern networking portfolio to manage and simplify their increasingly complex connectivity needs. We believe this will deliver significant value for our customers and for our shareholders through long-term revenue growth and gross margin expansion. Finally, I am proud that we have achieved admirable financial results in this latest fiscal year while also remaining steadfast in our commitment to operating sustainably and responsibly with a strategy that's directly aligned to our business and spans our entire value chain. We continue to excel in helping customers leverage technology to minimize their environmental footprint. Our sustainable IT expertise, innovative lower-carbon solutions and smarter IT life cycle solutions are all strategic differentiators for HPE. It is good business to have customers advance their climate goals. In fact, sustainability-related customer engagements contributed approximately $1.8 billion to HPE's net revenue in fiscal year 2023, a 500% increase over the past 5 years. HPE's Executive Committee and I are extremely proud of our talented and dedicated team members around the world, who are responsible for driving our results. These team members are high-performing and engaged. HPE is committed to continue to attract and retain top talent with diverse knowledge and capabilities. I am pleased the half of the team members in my Executive Committee and half of our Independent Directors are women. We recognize that nothing we do is possible without the right talent, bringing diverse backgrounds and ideas to fuel innovation and success for our customers. We have done the work to ensure we have high engagement with our talent, evidenced by our team members' engagement scores, which remains at record high at 83% in fiscal year 2023. We also continue to commit to advancing equity and inclusion as fundamental tenets of our corporate culture. All these efforts have resulted in significant recognition in the market. Our recent testament is HPE's #1 ranking on JUST Capital's Most Just Companies in America, which makes us very, very proud. HPE remains focused on capitalizing on the growing market opportunities in AI, hybrid cloud and networking. Our unique strategy and investments position us to continue accelerating value for our shareholders, and we are committed to executing with strong discipline and a sense of urgency. And while headwinds exist in certain segments of the IT market, HPE is laser focused in the areas where we know we can do more to improve our performance and enhance profitability. I am confident in our leadership and our more than 60,000 team members worldwide to deliver for our shareholders. We appreciate your continued investment in HPE. Thank you for joining us today, and I look forward to sharing our progress and success with you in the months to come. I will now turn it over to Dave.

Thank you, Antonio. Let's now move on to the question-and-answer portion of this meeting. [Operator Instructions] For our first question, we've received a leadership-related question. And this shareholder writes, in a December 2023 news article, the CEO assessed that the new incoming CFO as a strategic and visionary CFO. He said that he look forward to partnering with her to bring bold and new experiences to customers and deliver greater returns to shareholders. What bold new experiences can HPE customers expect? And what is she focusing on to drive innovation and financial results that deliver greater return to shareholders? Antonio, over to you.

Well, thank you, and thank you for the question. I'm super excited to have Marie Myers as the new CFO. She joined us in January after an extensive career at HP, HP Inc. and Compaq. And I know her for many, many years. And I think she is extraordinary in many levels. Obviously, her background in transforming companies is something that we really value. And as we continue with our transformation, we need to do more of that. But we really appreciate her strategic mindset in managing change because ultimately, we are a company that has to continue to change as the market evolves. And she's already collaborating with our team to drive innovative -- what is the right innovation agenda with me, increased customer centricity and obviously, maximize HPE's growth and profitable growth. I think Marie will enhance also our operational efficiency and also from a strategy perspective, how we allocate resources into the right place as we continue to focus on those key 3 areas of the market, which are networking, hybrid cloud and AI. So super excited to have Marie onboard. And we are early in the process, but I can tell you she's already making a big difference.

Thanks, Antonio. And Marie, we received a capital allocation finance question. This shareholder rights, what are the factors in determining how often a dividend is paid to shareholders and the amount of the dividend HPE will pay to shareholders? Marie, over to you.

Thanks very much, David, and good morning, folks. Look, first of all, I'll start off by saying, I'm delighted to be here today, and we typically pay our dividends quarterly. The amount of the dividend, if you look back over the course of history, has been steadily going up since HPE's separation from HPE -- sorry, from HP. And this has been determined on a very disciplined financial framework. And the intention behind that is to balance our dividend with our buybacks and obviously, as Antonio mentioned, with our reinvestments in the business. And obviously, we have regular discussions with our Board of Directors around our dividend as well. Thank you, David.

Actually, Marie, we have a follow-up question that just came in live for you. When will HPE be increasing its dividend?

Actually, David, we just declared an increase in our cash dividend recently and commented on that in our Q1 earnings. So -- and honestly, we look at it continually, and it's a very important part of our capital allocation strategy. So thank you very much, David.

Thanks, Marie. For our next question, we have one related to HPE strategy. So a good one for you, Antonio. Given the recent announcement, how does HPE generally manage integration of the business, services and employees from a major acquisition?

Yes. Excellent question. And I will say that in my last probably 7 years almost and actually going back to the Aruba acquisition, we learned what really works and what doesn't. And fundamentally, it comes down to a very disciplined process that enables the management and the Board of Directors to really, on an ongoing basis, oversee and evaluate the integration and the performance of the acquired assets. So there is a very stringent process here, including one of our committees, which is the Financial Investment Committee, that reviews every single meeting the performance against those acquisitions. Now, not every acquisition is created equal. So we learned a lot through the Aruba acquisition, have been very successful and was the largest acquisition actually until the announcement we just made with the intent to acquire Juniper. And so we have different playbooks, but fundamentally, it comes down to accountability and accountability at the operational level and at the financial level, while we maximize the growth areas on the revenue side, An example of that is also the acquisition of Silver Peak, which obviously is in the software-defined wide area network, networking, [ access ] security, which is also in the security space, and even private 5G. So we, again, will remain deliberate in our planning of the proposed acquisition of Juniper to create the strongest, most modern combined business that will benefit the customers. But remember, this segment of the market comes with structural higher gross margins, which in turn will deliver higher value for our shareholders. So that's our goal. That's who -- I'm holding myself accountable. And the Board is holding us, management, accountable for that. But as Pat said, we looked at all the options, and we felt that this acquisition was the best long-term value creation for our shareholders, and we will deliver on that.

Thanks, Antonio. Next, we received a question related to diversity at the company. Antonio, I think this would be a good one for you as well. What percentage of upper management are women?

This is close to my core belief that a diverse company is a better company. Obviously, I have a multinational background by birth and by design. In many ways, my working experience is all over the world, and I do believe that it comes down to difference of opinion, difference of backgrounds. Obviously, gender is super important. And it starts with inclusion, right, and obviously, diversity. But what I'm really proud is that today, our Executive Council is actually 50-50. So 50% of my direct reports, brilliant women, different backgrounds. They are doing a fantastic job for our customers and for our shareholders. But when you look at the total company level, the female representation across the company is 28%. And we hold ourselves accountable to continue to raise that. So as we think about filling positions that are open, we always look for the diversity angle. And we review this on an ongoing basis with our HRC, the HR Committee, to make sure we build the right pipeline and we advance that talent. And at the same time, it's a core tenet of our culture. So while I'm proud of the progress we have made, there is significant work still be done. But the good news at the governance level, at the executive level, we are there, but we still need to work down in the organization.

Thank you. Well, the next shareholder question relates to human capital management. And this shareholder asks, several executives have left HPE over the last year, what steps are being taken to retain talented leaders and employees?

Absolutely. Part of the people moving on also is because we simplify the organization. Pat made a comment, right, as we become more focused and we make progress with our strategy, we also increase scope and empowerment. So we make sure that we simplify decision-making and the execution itself. But I'm really proud of the talent and the executives we have in the organization. But when you look at our key talent retention rate, continues to improve actually, and it is now a 97% annualized, which is very high. Obviously, during the COVID period, there was a little bit more attrition, voluntary attrition because the involuntary is something we do as a part of the performance management. But ultimately, we feel good where we are. We feel that we have the right structure for the megatrends and the innovation where we're making the investments. And we are also proud to continue to increase what we call our internal mobility rate, which is cultivating some of the top talents down in the organization, so we make the -- we prepare them for what comes next. And so very recently, we implemented a new approach to performance and career development, which we know as a performance enablement, where every quarter, we review not only our talent's global progress, but also their career aspirations and development plans. And I'm a great example of that, I will say. When I joined HP in 1995, I was in the call center, supporting customers on the phone. 23 years later, I became the CEO of the company. And that positive cycle is where we need to continue to instill. And ultimately, management is accountable to take ownership for that because it also improves the culture as well. So very, very well positioned. As always, you've got to manage it, and you have to be intentional. And we have programs around, which are also about leadership development and also talent development.

Thanks, Antonio. All right. A question coming in. I think this one will be for you, Pam. We have the shareholder writing, how is HPE managing risk and ensuring regulatory compliance? Pam, I think this is a good question for you as you're a member of our Audit Committee.

Thank you, Dave, and thanks for the question. Our company maintains an enterprise risk management program that's overseen by our Chief Financial Officer and is supported by an HPE Executive Risk Council that includes executives from across the business units. Our company provides quarterly updates on the program's risk and assessment and management activities to the Audit Committee, and it provides an annual update to the Board. We also have additional oversight, and it is shared across the Board committees, HPE experts across cybersecurity, legal, ethics and compliance, global trade, [ all ] facilitate regulatory compliance in collaboration with other relevant functions and businesses. Back to you, Dave.

Thank you, Pam. We have another live question that came in. I think Antonio, this would be good for you. It seems like your competitors are getting more traction in the AI space than you. What is HPE doing to stay ahead?

Well, thank you for the question. I will say, I don't believe our competitors are ahead of us. I think we still have work to do to clarify a little bit how we report our numbers because ultimately, HPE has a unique portfolio that covers all the aspects of the AIs we discussed before, which is training, tuning and inferencing. But I think sometimes this thing gets a little bit confused with our Supercomputing business. And so HPE has 5 key differentiators when it comes down to AI: Number one, our Supercomputer heritage gives us a unique position to run this massive AI system at scale. No one else has that. Because when it comes down to those type of leadership-class systems, it's actually only a couple of companies left on the planet. And you will see next week when we open a new leadership system for one of the laboratories in the United States government. Second is the fact that we -- as we think about this technology evolution, to be able to deploy this infrastructure in a sustainable way will require new innovation, in particular on the cooling side. And [ HP ] has more than 500 patents when it comes down to liquid cooling, which we intend to assert in the market, but that gives us a position of strength that we can build on. Third is that what we see today in the action of AI is pretty much in 2 buckets: service providers and what I call the model builders. And we are capturing a significant opportunity in the market, as we reported last quarter in our orders book, and we have a significant pipeline ahead of us. And then last but not least, which is super important, when it comes down to running these systems, you need a lot of services capabilities. And when you look at some of our traditional competitors, they don't have that. And that's something that will help us continue to grow because most of these systems, customers are not going to run it themselves because [ either ] when they have the data center space, they may not have the cooling, they don't have the power, obviously, which is one of the biggest challenges today. And we actually now have to run the systems. And in fact, we have been building a couple of sites where customers actually are deploying the infrastructure with us, and we are running for them. So that's why we believe this is going to be one of the biggest opportunities in the history of our company, which is an inflection point at the right time with our technology. And the investment in Juniper will accelerate that because by design, AI is a distributed workload that needs the network and the network efficiency. And the combination of what we have today in HPE in the supercomputing networking side with Juniper will give us a significant advantage for the years to come.

Thanks, Antonio. All right. Next, we have a question, Pat, I think, for you. It relates to HPE's Board succession planning. This shareholder asks, what succession planning does the Board have in place, given Dan Ammann is not standing for reelection and aging of some remaining members? Over to you, Pat.

Yes. Thanks, David. Thanks for the question. Look, we utilize our Governance Committee, and we regularly review the skills and the matrix. We have a skills matrix, where we look at all of our directors. We look at those skills relative to what we believe we need to successfully get relevant and to successfully execute on the company's strategy. And we have always worked and continue to work to build and evolve the Board so that we have a broad mix of the relevant backgrounds and experiences that we think matter. And I mentioned earlier today, Bethany Mayer joined our Board in 2023, and she brings an incredibly deep set of networking skills. And you've heard Antonio talk about the importance of the networking market. That's an example. So we periodically review director candidate qualification criteria. And so we're constantly evolving that. Our goal is to make sure that we have relevant forward-thinking, diverse in thought and background, technically capable and globally minded people sitting around the table. And we think that, that creates a richer and more constructive debate, and we have many of them in dialogue between the Board and management. And so that's kind of a regular process that we go through. The Governance Committee also determines whether the Board would benefit from additional directors, and if so, makes recommendations to the full Board. And so specific to the question, while Dan Ammann's decision to not stand means we will have one fewer director, we still have 12, in the near term, we've determined that our current size and skills are adequate, and we'll continue utilizing our, I'd say, very disciplined process to assess our ongoing needs. As to the question about age of directors, our focus as a Board is really more on average tenure. We want to make sure where we have a range of tenure with some historic perspectives as well as fresh perspectives. We look at board makeup, we look at individual director contributions while always valuing refreshment. We do not have a mandatory retirement age, but we are mindful of the ongoing need to evaluate the composition of the Board and more importantly, the Board's effectiveness. And in fact, we have added 3 directors in the past 2 years, who bring both strong financial and deep technological expertise that's relevant to our needs. So thanks for the question.

Thank you, Pat. So we have time for just one more question. And this one relates to HPE's strategy. The shareholder asks, what part of the business do you think is being overlooked that has more upside potential than what the analysts are giving it? Antonio?

Yes. I think there are several parts. But obviously, when I think about our portfolio from networking to hybrid cloud to AI, everybody in the past [ saw ] all the Server business [ secular ] decline. And I will say, well, with AI, now we have a new life of sorts, which [indiscernible] everything needs to compute. And now, this type of computer is changing dramatically. And so that with our innovation heritage, we have a massive opportunity. So I think people need to take another hard look at the server side. But clearly, networking, right? Networking is something that, when you think about our performance in one segment of the networking [ market campus ] branch, HPE has gained significant share. And the whole thesis is obviously as we continue to shift our portfolio to higher-growth, higher-margin areas, we should get more credit for that traction because ultimately, it's more structurally margin rich and is more sustainable. And I argue in simple terms, while I'm [indiscernible] try to say it in a simple way that people understand, the world needs more ports, whatever type of ports, doesn't matter; needs more ports to connect devices, systems and people and things. And with AI, now we need to connect all those devices, things and data to the right [ competition ]. And that's why this Juniper acquisition is, in my mind, a breakthrough for us because we already have a significant presence in that market. And now for the first time in the history that I know since I've been in HP and HPE for 29 years, it's the first time the company will have the entire intellectual property stack to cover every aspect of that segment of the market. And I think when I think about the hybrid cloud, we were very clear upfront that the world will be hybrid. And to me, hybrid is an experience that you need to deploy it for all the applications and workloads and data you have across your hybrid IT estate. I think now it's fair to say the world has come to the same conclusion. And GreenLake gives us a unique opportunity because once you are in the GreenLake platform, you may start with a compute, storage offering, you go to maybe some subscription software, now you may deploy an access point, going forward, you're going to deploy an AI instance. And that drives a unique unified sticky experience that ultimately drives services and software higher margin, which ultimately drives higher value for our shareholders. So I believe our strategy is spot on for the market. We need to continue to execute, and we need to continue to execute with sense of urgency, and we need to continue to drive cost competitiveness across everything we do.

All right. Well, thank you. That concludes our question-and-answer session. Thank you for your participation. And for any questions that we were unable to cover, please check the website annualmeeting.hpe.com in the next few days, where we will be posting copies of all the questions we received along with our responses.

Now we will be closing the poll shortly. And if you've not already voted and wish to do so, please do it now. And therefore, I ask that you complete your voting at this time. The Inspector of Election will not accept votes submitted after the closing of the polls. Any votes submitted during the meeting today will be subject to final verification by the Inspector of Election. Now I hereby declare that it is 11:44 a.m. Central Time, and the polls are now closed for voting on the items of business. I will now announce the preliminary results of the vote. Please note, the results to be announced are based on the preliminary tally provided by our Inspector of Election. All the votes are subject to the final count certified by the Inspector. So let's start with the votes cast for the election of directors. Kris?

Each of the 12 director nominees has received the requisite number of votes required for election.

Based on the vote, I declare that all 12 director nominees have been elected to serve for the next year, to hold office until their successors are duly elected and qualified. Now for the results of the vote on the ratification of Ernst & Young as HPE's independent registered public accounting firm. Kris?

The proposal for ratification of Ernst & Young as HPE's independent registered public accounting firm has received the affirmative vote of 99.32% of the shares voted.

Based on the vote, I declare the appointment of Ernst & Young as HPE's independent registered public accounting firm has been ratified. Now for the results of the vote on approval of amendment #3 to the HPE 2021 Stock Incentive Plan. Kris?

The proposal for approval of the increase of shares reserved under the Hewlett Packard Enterprise 2021 Stock Incentive Plan has received the affirmative vote of 93.19% of the shares voted.

Based on the vote, I declare that amendment #3 of the HPE 2021 Stock Incentive Plan has been approved. Next, the results of the advisory vote regarding executive compensation. Kris?

The proposal for approving on an advisory basis executive compensation has received the affirmative vote of 90.85% of the shares voted.

Based on the vote, I declare that our executive compensation on an advisory basis has been approved. Finally, the proposal for approving the certificate of amendment to the amended and restated certificate of incorporation to limit the liability of certain officers as permitted under Delaware law. Kris?

The proposal for approval of the certificate of amendment to the amended and restated certificate of incorporation to limit the liability of certain officers as permitted under Delaware law has received the affirmative vote of 66.9% of all outstanding shares of HPE entitled to vote on this proposal.

Based on the preliminary results of the vote, I declare that the proposal has been approved. Thank you, Kris. I will now turn the meeting over to Pat Russo to close.

Thanks, Dave. It is now 11:47 a.m., and I declare that the business of today's meeting is concluded, and the meeting is now adjourned. I'd like to thank you all very much for joining us today. We really are very grateful for your interest in HPE and invite you to visit our Investor Relations website for additional information or for a replay of this meeting. We will file the results based on the final vote tally in the days following the meeting. Thank you, and have a great day.