HP Rethinks Storage Plays

HP, stung by poor storage performance in its recent fourth-quarter results, is rethinking its strategy for 2007 -- but buying Symantec won't be part of it, according to execs at the company's annual meeting for securities analysts in New York today. (See HP Reports Q4.)

"We have a lot of work to do -- we know that we can do better in our market position," explained Ann Livermore, executive vice president of HP's Technology Solutions Group, which encompasses the vendor's storage business.

In a separate presentation, HP CEO Mark Hurd made it clear that doing better will include M&A, but he scotched recent rumors that the vendor is planning to acquire Symantec. "We will do targeted M&A, but you should not expect us to do big acquisitions," he said.

To illustrate this point, HP's outgoing CFO, Bob Wayman, predicted acquisition spending over the coming year in line with the $1 billion the company has spent annually on M&A since 2004, with the exception of the $4.5 billion Mercury Interactive deal. (See HP Purchases Mercury, HP Extends Offer, and HP Finalizes Mercury Buy.)

"We will continue to focus our M&A efforts around services and software," Wayman said.HP's storage business grew only 1 percent year-over-year in its fourth quarter, thanks in part to a slowdown in midrange EVA sales and less-than-stellar performance from its networked storage products. (See Storage Hurts HP's Quarter and HP Storage Gets off the Deck.)

As a result, HP is planning fresh assaults on each of its storage markets. For one thing, the vendor will use its channel partners to "aggressively" target the mid-market. Price will be the cudgel HP wields in an attempt to win more storage and server market share, Livermore indicated, as she described HP's desire to "price to win."

The company will also focus more closely on the emerging SMB marketplace, according to Livermore. (See SNW: Small, SAS-sy & Safe, Security Smorgasbord on Show, and SMBs Want ILM, Classification.) HP has been slowly adding flesh to the bones of its SMB storage strategy, recently revealing details of its StorageWorks All-in-One, or AiO, for small businesses. (See HP Fills In SMB Storage and HP Builds SANs for SMBs.)HP needs to fight harder in the SMB market, according to Charles King, principal analyst at Pund-IT Research. "If they are seeing some softening [in the SMB market] it's not surprising," he told Byte & Switch. "NetApp and EMC have been very aggressive in this space."

HP's Livermore admitted that the high end of the storage market is also posing problems. "We know that we did not have dense enough coverage in our largest accounts," she said. To address the issue, HP has hired hundreds of salespeople.The vendor is also taking a leaf from IBM's book with plans to wrap services around storage software and hardware in an attempt to lock large customers into its technology. HP took a step toward this today by acquiring data warehousing consultancy Knightsbridge Solutions for an undisclosed fee as part of its services push. (See HP Buys Knightsbridge Solutions.)

Knightsbridge, which targets the world's biggest companies, could help bolster HP's storage strategy, thanks to its emphasis on data warehousing, data integration, and data quality. "These are all areas that get down to the fundamental question of how storage resources are used," said Pund-IT's King.

HP also revealed today that it expects revenues somewhere between $101 billion and $103 billion for fiscal 2008.

In trading earlier today, the vendor's shares dropped 43 cents (1.07 percent) to $39.58.

James Rogers, Senior Editor, Byte and Switch