Hewlett-Packard Co., while moving swiftly forward with many of its business lines since its historic acquisition of Compaq Computer Corp. two years ago, is scrambling to gain footing with one unit that ships a legacy Compaq product, Alpha-based servers.
While overall revenues for the Palo Alto, Calif., company grew 9 percent in its third fiscal quarter ended July 31, sales for its Business Critical Systems unit, which includes Alpha- and PA-RISC-based servers, declined 8 percent, said HP Chairman and CEO Carly Fiorina, who announced the financial results in a conference call with analysts and the media last Thursday.
The news shook the senior ranks at HP, which views such high-margin servers as entry points for a host of related peripheral products and services. Issuing its earnings report a week earlier than expected, the company announced a third-quarter net of $586 million, or 19 cents per share, missing analysts estimates of 31 cents per share.
“Although we are satisfied with our performance in Personal Systems, Imaging and Printing, Software and Services, these solid results were overshadowed by unacceptable performance in Enterprise Servers and Storage. Here, execution issues cost us and we are therefore making immediate management changes,” Fiorina said in a conference call. “With these changes, we expect our server and storage business to return to profitability in the fourth quarter.”
Several hours later, Fiorina announced an overhaul of the management of the companys Customer Solutions Group, a unified sales force responsible for all accounts. As part of the reorganization, longtime Compaq executive Peter Blackmore was ousted as executive vice president of CSG and replaced by another former Compaq exec, Michael Winkler, who retains his duties as HPs chief marketing officer. Jack Novia, who was senior vice president and general manager of the Technology Solutions Group, replaced Jim Milton as senior vice president and managing director for the Americas region of CSG.
But these moves are only the latest to try to revive HPs enterprise server business. In May, HP folded its enterprise systems and storage under the same umbrella as its services and software, calling it the Technology Solutions Group and putting veteran Ann Livermore in charge.
Under the direction of Livermore, the new divisions executive vice president, HP is working to turn the tide by bolstering initiatives to transition from Alpha and PA-RISC and standardize its high-end systems on Intel Corp.s 64-bit Itanium architecture and find synergies among its wide range of products.
“Were already seeing several benefits in our strategy to bring to customers solutions that are more integrated, such as servers with storage attached or servers with customer support attached,” Livermore said.
The company will unveil the latest fruits of this work at this weeks HP World user conference in Chicago. HP Services Chief Technology Officer Tony Redmond, for instance, will discuss how HP is field-testing a security scanning technology developed by HP Labs. The technology will operate across an enterprises IT infrastructure, looking for security vulnerabilities and downloading appropriate remediation patches.
HP will also offer more details on its road map for nudging users of its Alpha servers and HP9000-series servers, which are powered by the companys PA-RISC architecture, toward Integrity systems. HP plans to release its last Alpha chip this week and the last PA-RISC chip next year.
As a result, it is pumping out tools and services designed not only to help customers migrate to its Itanium-based Integrity servers but also to entice Unix customers from other companies—in particular, IBM and Sun Microsystems Inc.
“Weve developed some tools that enable us to do a Solaris migration to Linux or HP-UX in an expedited manner. We also have tools in the mainframe-attack program because IBM is readying a forklift upgrade [with its Power5 systems],” Livermore said in an interview with eWEEK.
Competitors see HPs Itanium move as a chance to scoop up HP customers. Sun this week will announce it is expanding its HP Away program, which lures AlphaServer customers to Suns SPARC/ Solaris architecture. The Santa Clara, Calif., company will extend HP Away to include the Latin American and Asian regions and will target HP-UX customers, officials said.
Ron Hinsley, vice president of IT for Aquila Inc., said that after evaluating Unix-based systems from IBM and Sun, his company moved much of its back-office operation from an IBM mainframe to two PA-RISC-based systems from HP. Hinsley said that he felt comfortable with HPs support and services and that he also liked that should Aquila move toward Linux down the road, running an HP system would make for an easy transition.
“I was pretty much looking for what was successful right now,” said Hinsley in Kansas City, Mo. “Ive been around long enough that I knew [that Itanium systems] would work. I really have to be concerned with whats out there now.”
Meanwhile, HP continues to unveil technology and services designed to align Alpha and PA-RISC systems more closely with the Itanium.
At HP World, the company will announce that, with an enhancement due in October, its HP-UX 11i Version 2 operating system will run on both the Itanium and PA-RISC platforms. Having a common operating system will enable PA-RISC users to introduce Itanium systems into their data centers more easily.