HP Midrange Storage Impresses

Hewlett-Packard Co.'s (NYSE: HPQ) storage business today is like an offensive line on a winning football team: Regardless of how well it performs, everybodys talking about other team members the next day.

The storage performance was all but lost in accounts of how HP stormed back to have its best quarter since the Compaq merger in May 2002. Every business unit was profitable, and Imaging and Printing earned more than $1 billion. So hardly anybody noticed that midrange storage array sales more than doubled.

HP CEO Carly Fiorina did cite “a strong performance in the fastest growing segment of the storage market” in her earnings review. That segment is the midrange market, where HP increased revenue by 109 percent year-over-year to go with a 14 percent jump in the high-end.

The Enterprise Systems division, of which storage is a part, showed a $106 million profit in the quarter.

The revenue jump shows HP’s storage segment has made a smooth transition from the Compaq merger. HP slotted its new EVA3000 product line under the EVA5000 inherited from Compaq and tried to keep customers of both happy.“It was a difficult transition,” says John Webster of Data Mobility Group. “Their basic conclusion was, ‘We have a lot of product, we have a lot of overlap, but we also have a lot of customers. We’ll try to keep as many customers happy as we can, and try not to lop off product at the expense of customers.’ It’s a difficult strategy, but it absolutely seems to be working.”

The fourth-quarter midrange jump came before HP enhanced its EVA family of arrays last month (see HP Stirs Midrange Mix). On the high end, HP licenses the Hitachi Lightning array and resells it as the StorageWorks XP (see HP, Hitachi Renew Vows).

It probably helps storage sales that HP’s server shipments are No. 1 in the U.S., but storage is holding up its end in the enterprise group.

“We are encouraged by strides made in the enterprise segment, specifically the growth in the storage market,” wrote Kevin Hunt, CFA, of Thomas Weisel Partners in a report on HP.

Will the growth continue? Even Fiorina was cautious about significant growth in the overall enterprise business.“In terms of demand, I think it's fair to say that while the enterprise environment is improving, it is slight,” she said. “It is clearly improving less than the consumer market. So we were not counting on a huge improvement in demand in the enterprise space, but I think it's fair to say that people are becoming increasingly optimistic -- but cautiously optimistic.”

Fiorina also said HP closed the acquisition of Persist Technologies Inc. Tuesday (see HP Buys Archive Guys). HP is hoping Persist’s archiving technology will bolster its information lifecycle management (ILM) strategy, and today they announced a partnership with Cap Gemini Ernst & Young to deliver ILM services. HP will provide the systems, storage, consulting, and support for Cap Gemini’s storage consulting services.

— Dave Raffo, Senior Editor, Byte and Switch