Is Neri’s neck on the chopping block?
However, sources who talked to Fortune pointed to several clues, hiding in plain sight, about what Elliott potentially wants from HPE.
“Near the end of the quarter, we realized that the cost of our inventory was slightly higher than the cost that we had in the pricing. That’s on us. That should never happen,” Neri said.
That was an understatement. The screwup wiped more than $3 billion off HPE’s market cap.
It also drew attention to HPE’s share price.
On the day the news broke that Elliott wanted influence over the company, JPMorgan analyst Samik Chatterjee and his team published a research note that said Elliott was probably “1) addressing the discount at which the shares of HPE trade on a standalone basis relative to peers; and 2) improving execution and efficiencies to better align with best-in-class peers, like Dell and Cisco.”
Neri has been CEO for seven years. Meanwhile, six of HPE’s 12 board members have been there for 10 years or more. The chairman of the board, Patricia F. Russo, has been there since 2015. The implication is that it might be time for new blood.
But ousting Neri may not be Elliott’s plan.
“Over the last 15 years, we have collaborated with more than 200 companies to reach mutually beneficial solutions that enhance shareholder value. During this period, we have only had to pursue a U.S. proxy contest to this stage of the process three other times, making Phillips 66 an extreme outlier,” Elliott said at the time.
While it is not clear what, exactly, is going on between HPE and Elliott, it is likely that the board is in talks with its new stakeholder.
HPE told Fortune it welcomed the move: “HPE and our Board maintain an ongoing dialogue with our shareholders on a range of issues. While we do not comment on specific communications that we may have with any our shareholders, we value the constructive input of all of our shareholders and all of our other stakeholders.”
