Good afternoon, and welcome to the First Quarter 2016 Hewlett Packard Enterprise Earnings Conference Call. My name is Laura and I'll be your conference moderator for today's call. At this time, all participants will be in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Andrew Simanek, Head of Investor Relations. Please proceed.

Good afternoon. I'm Andy Simanek, Head of Investor Relations for Hewlett Packard Enterprise, and I'd like to welcome you to our Fiscal 2016 First Quarter Earnings Conference Call with Meg Whitman, HPE's President and Chief Executive Officer; and Tim Stonesifer, HPE's Executive Vice President and Chief Financial Officer. Before handing the call over to Meg, let me remind you that this call is being webcast. A replay of the webcast will be made available shortly after the call for approximately one year. We posted the press release and the slide presentation accompanying today's earnings release on our HPE Investor Relations webpage at investors.hpe.com. As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. For more detailed information, please see the disclaimers on the earnings materials relating to forward-looking statements that involve risks, uncertainties and assumptions. For a discussion of some these risks, uncertainties and assumptions, please refer to HPE's SEC reports, including its most recent Form 10-K. HPE assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in HPE's quarterly report on Form 10-Q for the fiscal quarter ended January 31, 2016. Finally, for financial information that has been expressed on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the tables and slide presentation accompanying today's earnings release. With that, let me turn it over to Meg. Margaret C. Whitman - President, Chief Executive Officer & Director: Thanks, Andy. Good afternoon, everyone. Thank you for joining us today. We've now completed our first full…

We will now begin the question-and-answer session. Our first question will come from Sherri Scribner of Deutsche Bank.

Hi. Thank you. Good job on the operating margins. I was hoping you could give us some detail about how you're thinking but margins, particularly in the Enterprise Group as we move through fiscal 2016 and some of the other operating margins? I you've commented on Enterprise Services, but wanted to get your sense about the Enterprise Group in particular with the new products coming out? Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: Sure, Sherri. We did see some margin deterioration year-over-year if you look at the margins for EG, in total, they were at 13.4%. Most of that was driven by FX, so keep in mind in the first quarter last year the euro, as an example, was at 124 and the average accounting rates in the first quarter this year was 108. So we still saw significant pressure from a FX perspective when you look at the first quarter. Going out for the rest of the year, we would expect the margins to stabilize and maybe get a little bit of a lift particularly as we continue to grow the storage business as well as the networking business. So as you know, those businesses have a healthier margin profile so as we continue to grow those, we should see some lift there. And then, the only other major comment I'd make is on the ES business. Again, we saw some great performance there in the first quarter, margins at 5.1%, up 210 basis points year-over-year. So the efforts of the team continues to execute upon as they're transforming that business, and the seasonality in that business. We would expect those margins to improve over the course of the year and settle on average in the range of 6% to 7% as we talked about at the Analyst Meeting in September.

Okay. Perfect. And then just thinking about your free cash flow guidance. Now you're planning to spend 100% of your free cash flow, returning that to shareholders. Does that change your acquisition strategy? What are you thinking about acquisitions this year? Thank you. Margaret C. Whitman - President, Chief Executive Officer & Director: So, we continue to execute a returns based capital allocation strategy, and given where the stock price has been trading, this is one of the best return on investments that we can actually make. And as I said when we were on our road show for the new Hewlett Packard Enterprise, our first choice is, from an innovation perspective is organic innovation. Look at the success of the 3PAR all-flash storage array, internally homegrown, growing three times the rate of the market, and gives that benefit of a common architecture from top to bottom. The benefit of doing organic innovation is you don't end up with a Frankenstein of architectures. The second choice would be acquisitions that look like 3PAR, 3Com and Aruba. These have been very successful acquisitions for us. They are additional complementary technology that goes through our excellent distribution system. But, again, where the stock is trading right now? We think that this makes a lot of sense to buy back shares, which is why we've decided to go to 100% of the free cash flow.

Thank you.

Great. Thanks, Sherri. Next question, please.

The next question will come from Kulbinder Garcha of Credit Suisse. Kulbinder S. Garcha - Credit Suisse Securities (USA) LLC (Broker): Thanks. I just have a couple of clarifications, actually. Maybe for Meg, first of all, and Tim touched upon this. You talked about how you're seeing constant currency revenue growth over several quarters. All businesses have grown since the end of 2010. Are we now at the point whereby this business might sustainably at constant currency in revenue terms just grow? I'm not asking for a number of percentage growth rate, but do you think you have that visibility? Because the reason why I ask is, Tim also mentioned visibility in January, and obviously, we can see what the markets have been doing and the macro. So I'm kind of curious as to how we see sustainable growth of the business? And then also, just for Tim, on the Enterprise Services margin guidance and the growth guidance for this year, given the contract value growth, given the mix shift you're seeing in the business, the cost changes you're putting through very well, why isn't – that guidance just seems for Enterprise Service is now very conservative. So is there some caution you're reflecting in that guidance in the balance on the Enterprise Services side specifically? Many thanks. Margaret C. Whitman - President, Chief Executive Officer & Director: Yeah. So on the overall growth rate of the company, remember, we said at the beginning of this year that we would grow Hewlett Packard Enterprise in revenues in constant currency, and we are on track to do that as you can see from Q1. Again, from an as-reported basis, the compares get earlier – I mean, get better in the second half of the year because we've worked through those big…

Great. Thanks, Kulbinder. Next question, please.

The next question comes from Toni Sacconaghi of Bernstein. Toni Sacconaghi - Sanford C. Bernstein & Co. LLC: Yes. Thank you. I'm wondering if you can update us on the status of expected restructuring and separation charges? I think as of last call, you had talked about $1.7 billion in cash impact this year and that you expect it to be front-end loaded. It ended up being less than one quarter of the year's total. And so, I'm wondering if a) you can give us an update on how many people came out in the quarter, what that expectation is for the year, and are we incorrect in what I just played back in terms of understanding that this didn't appear to be more front-end loaded, in fact, it felt less than linear, and why that might be? Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: Sure, Toni. A couple of things that I'd say about the restructuring. We are on track. So as we called out at the Analyst Meeting, we will be about $1.2 billion in cash. So we are on track for that this year. And then as far as how many folks that we've taken out so far, it will be 3,000 in the first quarter. We don't really guide on what we're going to take out for the entire year, but the only thing I'd say is we're on track and that $1.2 billion in cash for this year still remains there. Toni Sacconaghi - Sanford C. Bernstein & Co. LLC: And separation, that was $600 million I believe and you did $79 million in the quarter, where do you stand on that? Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: No. We did $300 million. You're right, it's $600 million in separation for the year, and we did $300 million in the first quarter. Toni Sacconaghi - Sanford C. Bernstein & Co. LLC: Okay. But the cash impact was only $79 million or was it grouped in another group then? Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: No. No, the cash impact was a $300 million payment. Toni Sacconaghi - Sanford C. Bernstein & Co. LLC: Okay. And then finally, you mentioned the benefit from a divestiture in ES. Was that a margin benefit? And is that part of the reason for not being more optimistic about margins over the course of the year? Or was that either immaterial or a revenue impact? Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: No, that did have a impact from a margin perspective. I'd say it was not really material. It does have some impact on the margin to your point, but overall we feel very good about the health of the ES margins. Toni Sacconaghi - Sanford C. Bernstein & Co. LLC: Thank you.

Great. Thank you, Toni. Next question, please.

The next question will come from Katy Huberty of Morgan Stanley. Kathryn Lynn Huberty - Morgan Stanley & Co. LLC: Thanks. Good afternoon. Just quickly two questions. One, bad debt reserves, you mentioned was a benefit to Financial Services margins in the quarter. Was that a one-time benefit or does that flow through to future quarters? And then secondly, the sale to Tsinghua is taking longer than expected. Can you just talk about what milestones are left to get that deal completed and just some context around why it's been delayed? Thank you. Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: Sure. I'll hit the bad debt reserve and then I'll let Meg talk about Tsinghua. So the bad debt reserve was a one-time benefit. It was about, I think it was about 150 basis points of the improvement, and it's primarily driven by the fact that we adjusted reserves. We're still very conservative, but if you look at our loss reserves as a percentage of expected or historical losses, it's still at about two times, which is very conservative in the Financial Services business. Margaret C. Whitman - President, Chief Executive Officer & Director: Yeah, Katy, let me talk a little bit about Tsinghua. So you recall, we originally thought this would close roughly at the end of February, and now we are confident that the deal is going to close near the end of May. And we're working through some final Chinese regulatory approvals, so all the U.S. approvals have been received, (38:20), et cetera. Only the China Securities Regulatory Committee remains. They call that the CSRC in China, which is a bit like our SEC. And there has been a couple of things going on there. One is they have a new head of the CSRC. Two, there is a big backlog of deals, and they're working through that backlog. But we feel confident. We expect that deal to close at the end of May. As you can imagine, we've been in contact with all the appropriate regulatory people and obviously our partners at Tsinghua. So that's the way we think about it right now. There's also, as you know, a fair amount of volatility in the markets in China, and I think that frankly is slowing things down a little bit in China. And by the way, the H3C revenue over there is doing great. We had a record revenue for our China Networking business, and I take that as a positive sign. It means that the Chinese government is still leaning into H3C and that product and that business is being very well received in the China market.

Great. Thanks, Katy. Next question, please.

And our next question will come from Tim Long of BMO Capital Markets.

Thank you. Just two if I could. First quickly, Meg, you mentioned a few times the January weakness. Is this just macro? Any parts of your business or verticals that is hit more meaningfully? And then onto the networking business, I think you mentioned Aruba helping the switching business get back to double-digit growth. Could you just talk a little bit about is that AC driven? Or what is it that's helping those two businesses do such a good job of cross-selling? Thank you. Margaret C. Whitman - President, Chief Executive Officer & Director: Yeah. So the January weakness, we saw the last three weeks in January slow significantly in the United States, actually not that dissimilar from what I believe Cisco referred to on their call. And I don't have a good explanation of that except for one or two things. One is, remember the opening week in the market in 2016 was really tough, right? And I think companies are quite now extra sensitive to volatility in the market. They are quite quick to be cautious and pull back purchases. From a vertical perspective, obviously the weakest vertical was oil and natural gas. We saw that across the board and a lot of our oil and natural gas customers are in the United States. So that was a challenge and will probably continue. What I will say is, while I'm cautious about it, it looks like February has returned to the linearity that we would have expected. Oil and natural gas continues to be a bit weak, but there's been some strength in other parts. So, I'm not quite sure what happened in those last three weeks, but that would be my guess. Turning to Aruba and why it has helped our networking switch business, it's because the customers now believe we're completely committed to the Networking business. We are all in on Networking, and while we had HP Networking before, I think people thought, well, maybe they are not 100% committed, maybe a bit below scale. With the acquisition of Aruba, they've gained a great deal of confidence in our product roadmap and in our commitment to the business. And so Aruba I think has cast a really nice glow over the rest of our HP networking business.

Okay. Thank you very much.

Thank you, Tim. Next question, please.

Our next question comes from Maynard Um of Wells Fargo.

Hi. Thank you. I was just wondering if you just could help us a little more in terms of granularity around quarterly free cash flow and the charges. In particular, do you think that in the next quarter that your free cash flow will end up being positive and then continue to grow off of that? And then secondly just on Enterprise Services, are there any metrics you can provide or plan to give us at some point to give us some comfort on revenue stabilization? Whether it's book-to-bill or some other metrics? Thanks. Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: Sure. On the quarterly free cash flow, we're not going to guide on a quarterly basis. But, if you think about it, obviously, first quarter for us is seasonally low and that's primarily driven by earnings seasonality, right, which is driven by the profiles in ES and Software as well as the timing of that bonus payment, which happens in the first quarter of every year, it's a one-time payment. So we saw that same seasonality last year. Now going forward what I would say is we're going to get improvements every quarter, and primarily four areas; one, earnings improvement. So obviously we're back-ended loaded from an earnings perspective, particularly in the Second half. So as those earnings improve, obviously, our free cash flow will improve. The bonus payment is behind us now, so that is no longer a drag as you go forward. The cash conversion cycle, we were disappointed with the 31 days, but when you look at the fundamentals of our terms and mix, we're confident that that will get back to the mid-20 day range, so that will drive a significant amount of improvement. And then lastly the separation. So to…

Great. Thank you, Maynard. Can we have the next question, please?

Yes. The next question comes from Steve Milunovich of UBS.

Thank you. Two things. First of all, if you could comment on the EMC-Dell deal? I'm sure you're going to say that it's an opportunity to gain share, but do you have any proof points of that at this early date? And then second, you're going to be spending about $4 billion on stock repurchase here over time and it's at a time when IBM's had its biggest year of M&A, Dell and EMC are getting together, and there's probably more consolidation, Cisco is making a play for the data center, and you're very hardware-centric. So it seems like you should be making some acquisitions here. Are you comfortable with the strategic position that leaves you in? Margaret C. Whitman - President, Chief Executive Officer & Director: Yeah. So let me talk a little bit about Dell-EMC. So it is interesting to note how different HP and Dell – we have taken very different strategies in this environment. There's no question. And my view of this is predicated upon the speed that this market is changing. And so we decided to get smaller while they got bigger. We decided to lean into new technology while they're doubling down on old technology in a cost takeout play. They levered up while we delevered. And we're super-focused on being fast and nimble for our customers. So both strategies may work. I happen to like our hand better than the Dell-EMC hand. So how are we taking advantage of the disruption in the marketplace? So we learned a lot about how to do this in the context of IBM's sale of their server business to Lenovo. We have a very focused channel play where we – actually it's called Smart Choice and we have a big opportunity to go take Dell and EMC…

For what it's worth I think the stock is too cheap, too. Thanks. Margaret C. Whitman - President, Chief Executive Officer & Director: Well, we appreciate that, which is why we're backing up the truck.

Thank you, Steve. Next question, please.

And next we have Simona Jankowski of Goldman Sachs. Simona K. Jankowski - Goldman Sachs & Co.: Hi. Thank you very much. Just actually following up on that comment of backing up the truck, is the new target of returning 100% or more of free cash flow this year inclusive of the proceeds from the Tsinghua sale? Or would that be on top? And then I have a question as well. Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: No, the Tsinghua proceeds after the transaction would be on top of that. Simona K. Jankowski - Goldman Sachs & Co.: And that would be targeted for this year as well in terms of buyback or is that market-dependent? Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: That's really market dependent. I mean, it's hard to tell. I don't mean to be evasive, but it really depends on market conditions. It depends on the availability of U.S. cash. There are multiple variables in the overall equation, but we are committed to returning a vast majority of that through share repurchases. Simona K. Jankowski - Goldman Sachs & Co.: Okay. And then, Meg, on the hyper-converged product you mentioned, is that an organic product? And how meaningful do you expect it to be for revenues this year? Margaret C. Whitman - President, Chief Executive Officer & Director: Yeah. So it is an organic product developed in-house in record time and we're quite excited about this. The hyper-converged market is big. It's growing fast. It's also getting pretty crowded. You've seen a lot of announcements over the last couple of months, but we very much like this product from a side-by-side comparison and features and functionality to our competitors. Feel really good about it and I think it means that we can be a leader in this quite large and fast-growing part of the market. Simona K. Jankowski - Goldman Sachs & Co.: Thank you.

Thanks, Simona. Can we have the next question, please?

Yes. The next question will come from Wamsi Mohan of Bank of America Merrill Lynch.

Yes. Thank you. Tim, in your working cap comments, you noted headwinds from intra-quarter linearity and some opportunistic purchases, what regions – was it primarily just the U.S. that drove that linearity difference or were there other regions that drove that difference? And what components were you procuring opportunistically? And I have a follow-up. Timothy C. Stonesifer - Chief Financial Officer & Executive Vice President: Yeah. It was primarily the U.S., but we did see some pressures across the globe. And again, if you think about timing challenges and free cash flow and cash conversion cycle, it's both sales and purchasing linearity, so this time around it was the purchasing linearity and then we also made some strategic buys.

Okay. Thanks. And, Meg, just a follow-up on the last question around hyper-converged. Where do you think those dollars in hyper-converged take away from over the next several years? And do you view it as cannibalistic to any of your converged offerings? Thanks. Margaret C. Whitman - President, Chief Executive Officer & Director: There certainly is some cannibalism there, probably the converged infrastructure play, but I would say that this is part of a migration to the next generation data center. What we're seeing from customers of all size, if your company is older than five or 10 years, you are trying to figure out how you're going to take your existing infrastructure to the next generation of IT. And so this is part of the sale of – okay, you can get more out of your existing IT if you transform to a hybrid infrastructure, and this is one of the core hardware components and software-defined components that allows you to get the most out of this next generation of IT. So, listen, our business is cannibalistic. Right? I mean, new products come in to replace old products, but we think we can get an increased share of that data center spend, which we see actually growing and overall the margins on CS are accretive to servers and to the EG Group in general. Margaret C. Whitman - President, Chief Executive Officer & Director: Thanks, Meg.

Great. Thank you, Wamsi. Can we have the next question, please?

Yes. The next question comes from Jim Suva of Citigroup.

Thank you very much. My question is regarding the Services segment. Recently both the federal government as well as the Military has talked about some big contracts coming up for renewal as well as potentially breaking them up into smaller pieces. And we're just wondering, is there any risk there for HP about any of these contracts coming up specifically kind of midyear or second half to where they will enter another realm of some large contracts running off? Margaret C. Whitman - President, Chief Executive Officer & Director: No. Actually we think it's an opportunity for us because some of the contracts, at least the ones I'm aware of, are actually owned by many of our competitors. And so those competitors – I know one in particular that's going to break from one into three, and we have a really very good opportunity to get one out of those three that's right in our sweet spot. As has been widely reported, the U.S. Navy and Marines contract comes up – I can't remember if it's in 2017 or 2018. I think it's the end of 2017, beginning of 2018 we have to start rebidding that. But we know how to do that. We've done it for years. So actually I think we're on the right side of most of these federal contracts that are breaking up.

Great. Thank you, Jim. I think we have...

Thank you very much.

Thanks, Jim. I think we have time for one more question, please.

Thank you. And the next question will come from Shannon Cross of Cross Research.

Thank you very much. I'll just stick with one question. So, Meg, can you talk a bit about what you're seeing on the cloud? And I know you've signed a deal with Microsoft and you've talked a lot about a hybrid cloud, but maybe you can talk a bit about what you're hearing from customers in terms of their thoughts about moving to Azure or AWS solution versus maybe using more of a hybrid one? And then also how you're thinking about server impact this year and going forward from cloud, given last year was so strong and you still have benefit I think this year from Gen9? Thanks. Margaret C. Whitman - President, Chief Executive Officer & Director: Yeah, sure. So what we're hearing from customers is there is almost universal acceptance that their environments will be hybrid. And there's almost universal acceptance that it has to start with an analysis of the apps. How many apps does the customer want to have? Is there opportunities to reduce the number of apps and consolidate? And then what instantiation do you want that app to be on? Some apps are going to stay locked down in a customer's data center, untouched by anyone's hand other than their own employees, but some apps will go to a private cloud on-prem, a virtual private cloud, a managed private cloud, and then obviously to the public cloud. And we're seeing workloads move because even going from a traditional data center to the private cloud can be a 20% to 30% savings to a customer for that workload, which is meaningful. So, as you know, we are the leader in private cloud. It is the first step that many customers take and then they think okay, what would I like, what of my apps…

Great. And server thoughts? Margaret C. Whitman - President, Chief Executive Officer & Director: Server. Yeah, so we actually see growth in high-performance compute; growth in Tier 1, Tier 2, Tier 3, Tier 4 service provider. And in some parts of the world, core server growth. But we've got to make sure that we have the best server roadmap and the best opportunity for customers to run existing applications or cloud native apps, hence, HPE Synergy, which allows a developer to basically compose the infrastructure they need for their app. So HPE Synergy isn't exactly cloud by any stretch of the imagination, but it is in fact the next generation of infrastructure for the software-defined data center. I would also say that we are gaining share in that market. There's no question about it. We did a great job I think in grabbing share from Lenovo, as I said earlier, when those servers moved from IBM. And we are all over this Dell-EMC opportunity. So in a flat to declining market, which probably core servers are, at least over the next five years, we have to gain share, but there are real pockets of growth in the market as well. And HPC, by the way, high performance compute, we're like the last man standing there and we're investing in HPC and it's a core competency for the company.

Thank you.

Great. Thank you, everyone, for joining today. And, operator, I think we can conclude the call.

Ladies and gentlemen, this concludes our call for today. Thank you.