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HP Stays Hopeful on Storage
Exec says 1 percent decline is good, compared to double-digit drops in previous quarters
February 18, 2005
3 Min Read
Storage was the major drag on Hewlett-Packard Co. (NYSE: HPQ) when it bottomed out last August and remained a laggard when it staged a bit of a recovery last quarter (see HP Storage Slammed and HP Reports Q1). Yet, HP executives say networked storage remains a major part of the companys overall strategy.
“One of the important factors in our overall mix is some of the recovery activity in our storage business,” Ann Livermore, executive VP of HP's Technology Solutions group, told analysts on the company’s earnings report call Wednesday night. “We are on a trajectory to build back revenue, and that’s important to us as we look to the second half in terms our storage strategy.”
Despite Livermore’s optimistic tone, HP’s earnings report from last quarter raised the question of whether the storage glass is half empty or half full. On the plus side:
The 1 percent year-over-year decline in storage revenue was a huge improvement from declines of 15 percent and 10 percent the previous two quarters.
Revenues from HP’s Enterprise Virtual Array (EVA) midrange systems were up more than 10 percent from the previous quarter.
Increases HP made in its storage sales force since August appear to be driving sales.
HP claims it won share in the NAS market last quarter.
On the other hand:
HP storage revenues fell (albeit by 1 percent) year-over-year last quarter while the company's revenues grew 10 percent overall.
HP’s storage revenue was flat sequentially in a quarter where rivals Dell Inc. (Nasdaq: DELL), EMC Corp. (NYSE: EMC), and Network Appliance Inc. (Nasdaq: NTAP) posted significant growth (see Dell & EMC May Do NAS, EMC Closes Year With a Bang and NetApp Revs Up, Maybe Peaking).
HP will not upgrade its EVA system until May, making it tough to successfully compete this quarter during a product transition.
HP storage remains a far cry from where Compaq stood before the 2003 merger.
Naturally, Livermore, who heads HP’s servers and storage division, took the rosier view. “After a number of challenging quarters with significant year-over-year revenue declines, performance in storage is improving,” she says. “The investments we are making in storage sales specialists as well as in channel partners are increasing our sales effectiveness, but we recognize we have a lot more work to do. We are certainly not where we want to be yet in storage.”
Skeptics say chances of a quick turnaround look slim. HP lacks any compelling new products on the horizon and is in a period of uncertainty while searching for a CEO to replace Carly Fiorina (see HP Plots New Course).
“While management has been making new efforts to improve HP’s storage positioning, we believe it’s proving one of the toughest segments to grow/fix,” Fulcrum Global Partnersanalyst Robert Cihra wrote today in a research note. “Back when HP acquired Compaq’s StorageWorks, it became a behemoth in midrange storage, but we think the company has struggled versus new pressures from Dell and EMC.”
— Dave Raffo, Senior Editor, Byte and Switch
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