HP Flexes Its Server Market Muscle

Immediately after absorbing Compaq Computer Corp. this month, Hewlett-Packard Co. began leveraging its newly acquired strength in enterprise computing to win big contracts.

On May 16, HP, which became the worlds top server vendor following the merger, secured a deal with Reuters Ltd. to replace more than 110,000 servers from Sun Microsystems Inc. with Linux-based ProLiant systems, a product acquired from Compaq. The systems will be used to run Reuters Market Data System, a real-time financial data service.

"Many Wall Street companies, all the household names, are planning to migrate away from Solaris," Peter Blackmore, director of HPs Enterprise Systems Group, comprising servers, storage and software, said in an interview with eWeek. "And were very well-positioned there and can offer them either Linux, Windows or Unix-based systems."

In another key victory, HP, of Palo Alto, Calif., announced last week that it had signed a three-year agreement making it the preferred high-tech vendor to General Mills Inc., the $13 billion maker and marketer of food products. While General Mills previously relied on HP and Houston-based Compaq to supply its hardware needs, HP secured the deal following competitive bidding from rival computer makers.

"Were a much stronger competitor now," Blackmore said. "We have much more market leverage than before."

While HP already had an extensive product portfolio before the merger, Blackmore said it has been further enhanced with the addition of such offerings as Compaqs Himalaya line of fault-tolerant servers, which are used by the 15 biggest stock exchanges and some of the worlds biggest banks.

And while HP offered Intel Corp.-based servers, he said, "it did not have the market acceptance of Compaqs ProLiant, which is the industry leader in that space."

Overall, with the addition of Compaq, HP boasts even broader product offerings than IBM and more storage solutions than storage leader EMC Corp., with HP currently reselling storage devices from Hitachi Ltd., as well as Compaqs StorageWorks line, Blackmore said.

He also dismissed Dell Computer Corp., saying, "They dont have the services; they dont have our range of capabilities."

But one potential problem for HP may be its commitment to migrate all of its Himalaya and Unix servers to Intels Itanium processor.

"While they clearly gain much-needed efficiencies by consolidating on one platform, it remains to be seen whether Itanium will have the performance and momentum HP needs" to compete in the future against IBMs Power4 and Suns UltraSPARC systems, said Jonathan Eunice, an analyst with Illuminata Inc., in Nashua, N.H. "Unfortunately, thats something out of their control."

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