‘There is going to be change,’ says IT Partners President and CEO Steve Tepedino. ‘You don’t become one of HPE’s top five largest shareholders to keep the company as is. They are going to have a loud voice and fight for change.’
Hewlett Packard Enterprise partners said they are bracing for changes in the wake of activist investor Elliott Investment Management’s more than $1.5 billion investment in HPE.
“Nobody should expect the status quo going forward,” said Mike Strohl, CEO of Entisys 360, a cloud solution provider that partners with HPE and Citrix, which went through sweeping changes in the wake of an Elliott investment. “Since the changes were made with Elliott’s involvement, Citrix changed and we changed as well. Since those changes we have seen 100 percent growth in our business with Citrix and our services business with them grew by 30 percent.”
The potential for just how significant those changes could be came to light on Thursday with news website Semafor reporting that Elliott is pushing the Hewlett Packard Enterprise board of directors to replace CEO Antonio Neri.
In addition, Semafor is reporting that the HPE board is expected to meet in the coming days to respond to the Elliott Investment Management proposal to remove Neri, citing people close to the company.
In a statement provided to CRN, HPE said: “HPE maintains an ongoing dialogue with our shareholders on a range of issues and values their constructive input. The Board and management regularly assess the strategic direction of the Company with a focus on driving long-term shareholder value. HPE has a proven execution track record and continues to create efficiencies across our operations. We are confident in our strategy of aligning our product portfolio to market inflection points and customer needs and our ability to drive long-term value and success.”
Elliott Investment Management declined to comment.
However, a source close to the matter, confirmed that Elliott is pushing for Neri’s removal.
Strohl (pictured above) said the key to partners being successful in a situation like HPE finds itself in with Elliott Management is to be “open” to change. “HPE continues to be a top strategic partner with e360 and we welcome any changes and hope to participate in helping HPE navigate any changes that will make the business better and stronger and create new opportunities for companies like ours that are investing in the HPE relationship and will continue to invest going forward,” he said.
In the case of Citrix, the Elliott investment began in 2015 and it resulted in Citrix CEO Mark Templeton stepping aside, Elliott taking a seat on the board and a formal “operations committee” that worked with senior management to review its operations with an eye to improving its margins, profitability, and capital structure.
In 2022, an Elliott Investment Management affiliate, Evergreen Capital, and Vista Equity Partners took Citrix private in an all-cash $16.5 billion deal and combined it with data integration and analysis software developer Tibco Software.
The Citrix changes have resulted in fewer active partners, a reduction in partner margins and a focus on top customers that has led to higher prices for renewals and the company taking some deals direct.
After Elliott’s multibillion-dollar investment in Salesforce, which was disclosed in January 2023, Salesforce appointed three new board members and introduced a multi-year profitable growth framework. Just two months later, Elliott decided not to pursue director nominations and both Elliott and Salesforce committed to continuing the “productive relationship” they developed together.
The news of the Elliott Investment Management stake in HPE was first reported by Bloomberg on Tuesday.
A source familiar with the matter, however, confirmed that Elliott has built a more than $1.5 billion stake in HPE and plans to “engage” with HPE to “create shareholder value.”
The exact intentions of the changes Elliott could seek to create shareholder value remain unclear.
But Elliott Investment Management has a long and storied history of activist tech investing which has resulted in changes at companies like Salesforce, Citrix, SAP and even systems integrator Cognizant.
The Elliott Investment Management stake – which amounts to about eight percent of HPE shares – comes with HPE’s shares down 31 percent this year from $21.47 on January 2 to $14.88 on April 17. That share price decline amounts to a drop in market capitalization of $9.9 billion.
Top solution provider executives said they expect changes that could be limited or far reaching depending on whether HPE can successfully complete its $14 billion acquisition of Juniper Networks. But they also cautioned not to jump to the knee-jerk conclusion that the changes will be negative.
The U.S. Department of Justice is attempting to squash HPE’s Juniper Networks acquisition. A trial to challenge the DOJ ruling is set to take place in July.
Steve Tepedino, president and CEO of IT Partners, Tempe, Arizona, a top HPE enterprise partner, said with the Elliott Investment Management, partners need to expect changes but not assume all changes will be bad.
“There is going to be change,” he said. “You don’t become one of HPE’s top five largest shareholders to keep the company as is. They are going to have a loud voice and fight for change. Some of the changes might be good.”
Tepedino said he is hoping that Elliott Investment Management goes beyond a focus on “short-term” profit. “If they build a vision that has both short- and long-term value for HPE that is going to be a good thing,” he said.
Sarah Miles, founder and CEO of Milestone Tech, Castle Rock, Colorado, said she sees the Elliott Investment Management stake as a “compliment” of sorts for the impressive HPE portfolio including the potential for the Juniper Networks acquisition and the impressive HPE Private Cloud AI service and VM Essentials virtualization offering. “I’m an optimist so it is hard for me not to look at this and see the potential for good things,” she said.
“When you look at all the things HPE has put in place with a strong Private Cloud AI strategy, the storage strategy that is compelling, the history it has in the compute market and the strength it has there and the acquisition of Cray it is hard not to feel once Juniper get over the finish line HPE is really well positioned for market leadership,” added Miles.
The CEO for another top HPE enterprise partner, who did not want to be identified, is also keeping an open mind as to what the ultimate impact could be on HPE and its partners.
“Elliott could recommend some positive changes,” said the CEO. “It may be a good thing. Elliott could expose HPE to some independent strategies that could help influence and grow the business. If you are stuck in your own swim lane sometimes you don’t have the peripheral vision needed to run the business properly.”
A top executive for an HPE partner, who did not want to be identified, said the uncertainty created by the Elliott Investment Management stake could potentially stall sales.
“You already have uncertainty with the Juniper Networks acquisition and tariffs now you have more uncertainty being added to the mix,” said the executive. “This is just another thing HPE has to focus on that could distract from running the business.”
The executive said partners need to be ready to adjust their businesses based on the changes that could come in the wake of the Elliott Investment Management investment.
“We don’t know whether the changes are going to be positive or negative,” said the executive. “What we do know is that Elliott is going to look at anything they can do to drive up HPE’s market capitalization. That means they are going to look at the value of the different parts of the business, what they are worth and what they can do to materially grow the value of the company.”
