HP Plots Storage Comeback

CFO sees better products and more sales help as keys to recovery

September 10, 2004

3 Min Read
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Hewlett-Packard Co. (NYSE: HPQ) CFO Bob Wayman says he hopes an improved product portfolio and beefed-up sales staff will help HPs beleaguered storage business bounce back. However, he cautioned that it will take time to fix problems that had been brewing for at least a year.

Speaking at the SG Cowen Securities Fall Technology Conference in Boston earlier this week, Wayman said HP’s storage sales suffered because it let its storage product portfolio and number of storage sales specialists slip.

HP's total storage revenue of $709 million last quarter was down 15 percent from the same quarter last year. That prompted CEO Carly Fiorina to fire three executives last month within hours of announcing the company’s quarterly earnings (see HP Storage Slammed).

As evidence that HP is addressing its storage problem, Wayman pointed to new products -- including the Hitachi Data Systems (HDS) high-end storage system that HP will resell as the StorageWorks XP12000 Disk Array -- and an increase in the sales staff. (See Hitachi Struts Mr. Universal and HP Unveils High-End Array.)

“I think our problems in the storage area were not unique to Q3,” Wayman told analysts. “We’ve had somewhat disappointing storage results for several quarters, although Q3 was the worst. We had two issues. Our product portfolio has not been as strong as it was a year or two ago. Also, the go-to-market effectiveness of our storage sales force has weakened in the last year or so.”On the product front, Wayman said HP might have underestimated its competitors’ technological advances. As a result, HP had to heavily discount its storage systems while trying to catch up on technology. As for sales, he blamed management for letting the number of storage specialists fall below optimum levels.

“We’ve seen a decline in [staffing] numbers that was not according to plan,” he said. “We recognized this around six months ago, and we’ve been addressing this issue.”

That probably explains why the executives Fiorina fired in August were from HP’s enterprise sales team.

HP hopes the technology refresh it gets from Hitachi helps it compete against EMC Corp. (NYSE: EMC) and IBM Corp. (NYSE: IBM) on the high end. HP resells Hitachi’s enterprise SAN gear as part of a long-term deal between the two. HP added its own software for systems management, remote copying, and disaster recovery to differentiate from Hitachi’s system.

So far this year, HP has upgraded in its mid-range and low-end SAN systems, its Windows-based NAS, and a new low-cost Fibre Channel drive (see HP Announces SATA Enclosures, HP Tailors SANs for SMBs, and HP Expands StorageWorks). HP storage executives say more product rollouts are to come by the end of the year.Still, the question remains: Is it really a good sign when the announcement that drew most attention to HP storage in recent months was for a system built around Hitachi’s hardware?

When asked if he expects revenue this quarter from the XP12000, Wayman said, “Some, but there won’t be an immediate response. Both these issues [product portfolio and sales staff] have a little tail on them -- they’re not going to bounce back immediately. It will take a few quarters.”

— Dave Raffo, Senior Editor, Byte and Switch

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