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From New York Community Bank to HPE, we go.
Yeah.
Shares down about four point two percent in the after hours this after the company reduced its outlook for sales growth and profit in the current fiscal year, citing lower demand for networking products and a crunch in computer chip availability. We got with us Crawford del Pratt, president of IDC, and he caught up with the HP CEO right after the results. Crawford, good to have you with us, joining
us from Massachusetts this afternoon. First of all, your thoughts on the quarter and on the company reducing its outlook for sales growth for the fiscal year, and also what did you hear from Antonio Nari?
Yeah, absolutely, Carrollton, great to talk to you guys again. So when you look at HP, I think that the first thing you have to think about out is that this isn't the old HPE that we've kind of known.
This company has been going after the networking space and has really been succeeding in the networking space for a number of quarters, and if you look at where they were over the last at six quarters, they were growing their networking business, which is primarily a company they bought a number of years ago called a Ruba Networks, which is sort of campus networking and networking out of the edge of the network. That was growing an excess of
thirty percent. And so like we saw at Cisco, you've seen that we've pushed a lot of product out to customers, and customers have said, you know, we're going to take a pause here, and so they've taken a pause, and HP saw, you know, their networking business. They're what they call their intelligent edge business, which is the majority of the Erican business, up about only three percent, which compares
with the thirty percent kind of range. So you know, that's kind of this one big part of the story here is that the intelligent edges dropped down. The other part of the story is that obviously from a from a total growth standpoint, the company didn't even deliver on the low end of their of their range. So they were they were down fourteen percent, and that was fueled by what I would say was, you know, weakness in sort of that that core server space which was down
about twenty three percent in terms of total revenue. And so what I what I heard from Antonio, you know, understandably is that they've taken a tremendous amount of cost out of this business. And so from a margin standpoint, I think that you know, from a defensive standpoint, they've they've they've made a lot of progress, and that's really what they did was to hedge against the cyclical nature of the business, also hedging against the cynical nature of
the business. And rightly so, you know, they've seen forty one percent in their arr growth. So people think of HP as a gear company, but really they've got a platform for them to sell as a service gear as well as services around that year and that business continues to grow and over time, as we have seen, will continue to see that deferred revenue a crew to HP's
revenue stream. So you know, again it was a mixed quarter, definitely a pause on the part of a core part of their business that have been fueling growth.
And you know, I think that this is where they're playing a little bit of defense.
You talking with Antonio and Nery the CEO, and I guess our folks did too, and saying that downward revision in terms of the outlook is due primarily to that slow down on the networking market and a lack of availability of graphics processor units required to deliver high powered servers, telling all of us those we're talking about GPUs right, and he did say it looks like should improve in the second half of the year. The networking market is
poised to recover in fiscal twenty twenty five. He said, I mean, what was top of mind for you as you talked with him Crawford about.
Yeah, so as they talked to top of mind for me is yeah, thanks Carol. So top of mind was, you know, sort of why is it that when? When do we expect GPUs to get better? And and and and what they've seen is a significant amount of of of of bookings. I think they have, you know, a
significant amount of AI bookings uh in the quarter. I think they're going to be working down a set of AI bookings as UH they get I think with something a number somewhere around three billion that they're going to be working down for customer commitments that that they already have UH in place. And so you know, I think what you're seeing is similar to a lot of companies in that we are seeing a massive infrastructure upgrade within customer sets and it's really about who can get availability,
who's got the scale. And I think that ended up being, you know, one difficulty point for HP in the quarter
in that you know, the availability just isn't there. But I think that you know, we saw announcements from Intel, We've seen announcements from a m D. I think we're good want to see a significant availability in the second half of the year, and that I think is going to fuel a sustained set of growth and and Antonio talked about that for the infrastructure space as we get into the later part of the year, and I think i DC's numbers reflect that we expect the server and
storage market to deliver somewhere between six to eight percent growth this year, and that's gonna be fueled on AI.
Well, that's what That's exactly what I want to talk about, Crawford, was HPE's exposure to AI. And I'm wondering this from the perspective of, Okay, we know that IT spend is going up this year, and I know there's a lot of talk of a lot of that spend going toward companies like Nvidia, companies like super Micro to what extent is HPE of beneficiary of the run up in AI.
Oh, they're they're a massive beneficiary. And they're they're they're a.
Massive beneficiary by the way, as our Dell and and and and and as is you know companies like Lenovo, other infrastructure companies. HP IS. HPE is a little bit different, and they're different because of the bets that they've made around the network.
And the edge.
So they are going to be able to provide devices that are going to be processing at the core, which is their core server business. And don't forget these guys have a very very large footprint in supercomputers, which is going to be another area of AI growth and AI investment going forward as well at the edge, where I think we're going to see more what they call inferencing at the edge, being able to process at the edge in order to make decisions very very quickly on your data.
They're going to do that through Aruba, and they're going to do that through an acquisition that they just made with it that they've announced, which is Juniper Networks as well. They're going to be able to benefit from what I would say is the need for more ports because of AI. Right, So, as AI continues to proliferate, you're going to need to move more network. You need to move more data across the network, which means you're going to need more advanced
switching technology. And that's where their Juniper acquisition is going to come in. So you need to think of it as opening up the interstate highway, right, to open up the Interstate Highway, and HP is going to benefit from that as they close the Juniper deal. From those three to poor edge and network.
Hey, listen real quickly. Because Dell came out, it stock is taking off big time in the aftermarket. They've reported better than expected sales, the top estimates on AI server excitement. How do you contrast what we're hearing with Dell versus what we're kind of hearing kind of on the HPE side And just got about twenty seconds.
Yeah, So I think a couple of things. A.
I think that Dell had probably better availability and was able to get better sell through on GPUs, which again you know late breaking news here. The other is Dell doesn't have the same level exposure to the networking market, which is what we kind of just talked about, so Dell's able to really benefit if they can get them by selling these GPUs.
All right, great stuff as always, Crawford, thank you so much. Busy afternoon for you and really appreciate you carving out some time for us. Crawford del Prett, president of IDC, joining us from Massachusetts. Shares of HPE down about three percent, Dell is up sixteen percent in the aftermarket.
There are a lot of people out there who worry about money. In fact, if you worry about money, you're not alone. A new study from Wells Fargo says that more than half of Americans fifty six percent in fact, say they always worry about money even when they have enough.
Yeah, two thirds of Americans have decreased their spending due to the economy. These are just a couple of the nuggets in the Wells Fargo Money Study. It's a new study app for the bank and looking for us. Michael Leers is here. He's head of Advice in Planning at Wells Fargo, joining us here in our Bloomberg Interactive Broker studio.
Well is this just the human condition that no matter how much money somebody has, they're going to be worried about money.
There's an element of that, but part of this is also the narrative out there, okay, what money means, and you see it in social media, you see it in conversations, which is money might not be taking us as far as it used to, and so that's creating Actually, in our study, it actually creates an extraordinary worry beyond what people said they worried about when they're younger.
We were just talking about this with our TV crew about the price of a eating out for lunch or the price of getting a salad delivered. It's a stickershock for a lot of people, it is.
It's kind of ridiculous, or buying a piece of pizza. Buying a pizza and you're like spending fifty bucks, you like it.
You give me such a hard time for hoarding snacks upstairs here where we have they're so generous with their snacks here, Like you walk by my desk and it's just like it's a buffet of FREEINGA No.
But it's interesting what you say about kind of how we think about money. What is I've often thought about it. In a society, we're increasingly aren't handling cash like are we getting distorted that we just kind of, you know, digitally doing everything, then all of a sudden we're like, oh my god, where did it all go? But anyway, tell us more about you.
There's a piece of that. I mean, we ask people what they do every week, and they said things like spend nine hours scrolling social media and three hours a week looking at their money. So to your point, we are actually not looking at our money as much as we used to because remember when we used to have like clips that would put our money in wads and we put them in our pocket, or we'd actually eat your point, take out the cash get changed, or we'd have a piggy bank.
When I was a kid, my parents taught me how to balance a checkbook and like, if I didn't balance my checkbook at the end of the month, yeah, we'd get in trouble and my parents would be like, okay.
Where So we asked teens actually about their anxieties related to money in the survey, and we do something called the Taco Load Protocol where we just have conversations like this, And one of the teens said they didn't even know what a bank account was, and they wanted us to explain it to them. So you're spot on, You're right, it's not the typical thing these days.
Well, I feel like in my whole career, there's a couple things that we've always talked about, more women in executive suites and diversity and the importance of that, and yet we're still struggling with some of this stuff. But the other thing is financial literacy and the importance of teaching kids at a younger generation. I feel like kids, I don't know whether it's grade school, whether it's in middle school, but somewhere home economics is going to the wayside.
But we need financial economics being taught in schools. We talk about it, why aren't we doing it, and what the impact could be.
Well, what's important to think about is where do teens and young people want to get the information? We asked that question and where they get it? Yeah, and they do get it from their parents, So that's where they want to and that's where they actually get the information.
So we can look to let's say third parties to give our kids that information, but really they're looking to their family units to provide information about money, information about saving and investing, what to do with it, what constitutes things that are aligned with your values versus misaligned. And teens want that information and actually they said they want it from their parents, but they're also looking to banks to provide the information too.
But don't you think about it, like we talk about so if your parents aren't great managing money, then you pass on those bad habits. So I just wonder how do you break kind of the.
Stories about that. Absolutely, people can be open on social media this stuff with stuff like that, and also like how they break those habits which cannot be which is difficult.
Well, what are the toughest habits that teens say that they observe and they do themselves. Is lying about money, how much they spend, how much their house is worth. So adults admitted to doing it, but teams admitted it to doing it even more than adults. So we can say, what's going on to your point behind the scenes, how do we get past it? And what people say is there's just not a lot of money conversations going on
in their families at all. So it's still something we're reluctant to talk about for whatever reason.
It's also I think hard, like you know, as a parent of young kids, it's like a heart. It's kind of a hard thing to talk about, you know, because like, for example, I'm out with you know, my son who's five, and he wants a snack and I'm like, no, you can't have a snack, Like we can't buy a snack every time we leave the house, right, And he's like, is it because you don't have any money? And I'm like kind of, I mean yes and no. One time he told me to go to the money store. He's like,
can't you order some money? So we have money?
Well, money does grow on trees, Yes, apparently it does.
Hey, way.
We can we can learn a thing or two from young kids. Right, you break this down into different categories. One of the categories you define is the young affluent. Yes, who was young? Who are the young affluent?
So when we think of young affluent, think of twenty somethings. And when you think of twenty somethings, think of human beings who have anywhere between two hundred and fifty thousand to ten million dollars in assets. So it's a broad range of young people who actually are earning a lot and saving and investing a lot. Maybe they own a
home that's impressible. And what was very impressive about them is they're the most likely to want to do things like plan not delay their life because of money, but they want to be more and more intentional about it. So they seem to be one of the more optimistic and planful groups of any of the groups we talk to.
I am wondering in terms of this survey, and Michael, you know what you got. You're over at Wells Fargo. We are constantly whether it's government data points on consumers, how they're doing, how they're spending, whether we talk to CEOs, consumer facing CEOs. We've done that a lot, certainly this earning season. But I'm wondering what this survey helped you kind of say about the financial health of consumers or society right now.
Two things. One is that Americans are relentlessly optimistic, and so what the majority of our survey participants told us is they wanted to stop talking about problems. And so when you think of concepts like financial health, that's nice, but what they wanted is this solution, less of an assessment, more will tell me how I should be thinking about money, what I should be doing. The second thing is they're very eager to do things like figure out how to
stick with a saving an investing plan. It's not that they don't know that that's important. How do you stick with it? And they often think you have to do in big bite size now excuse me, large chunks rather than little bite sized chunks. They think bite sized chunks don't matter. So we have to reframe that. As you know financial services professionals, little tiny changes actually lead to big, extraordinary outcomes over two or three years. And I'm sure
you see it. Your child polic sees it. If you put a couple quarters, if you were able to do that these days, and if higgybank we all remember this, you know, a month, two months, three months later you could buy it toy. These are the types of things we need to start re engaging in.
Fortunately, lollipops and swim class are twenty five cents still, yes, so there are there are lessons to swim classes are not swim classes. I'm not even to get started on how expensive sluss. Hey, before you go, Michael, this is the first time that Wells Fargo has done this, so there's not this idea of comparing it to what's happened. What the research has said in previous years, but still, can you offer us any differences from earlier generations or how this thinking has changed.
Well, so the thinking has changed in terms of Americans not wanting to feel judged by others or by themselves about money anymore. And that's something that I think people are more willing to accept. I think social media has got us more aware that that's not a great behavior. And the second thing is they really want to set goals. And so we have a capability called life Sync and our mobile app, and what it does is allows you to actually say, I want to manage credit and debt,
I want to manage my spending. It can upload pictures to inspire you. So people want to be more inspired. And so that's where it's changing. People want to shift from pessimism, you know, toking let's say badly about themselves or judgmentally about themselves, and move toward optimistic ideas.
I think there's apps and so on, and so far they kind of help you track your spending, kind of set your goals. Can be really really useful. I was just going to say, there were a bunch of kids just outside our studio. I didn't know if that was part of your survey.
Or maybe I know them and I don't realize it, or maybe.
They have started to add our healthcare team leader Cynthia Kuhons and our kids a couple of juice boxes.
There is really adorable.
This was fun, very interesting.
Thank you so much for having me.
Really appreciate Michael Yeah, head of advice and Planning over at Wells Fargo, joining us here in our interactive broker studio. You're listening and watching Bloomberg Business with Carol Master Tim Stenevik. This is Bloomberg