HP Storage Sneaks Up

HP, which recently reshuffled its storage and server businesses, is slowly getting its storage story back on track, according to the vendor's Q1 results. (See HP Reports Q1 Results.)

Overall, the vendor posed a strong set of results, with revenues up 11 percent year-over-year to $25.1 billion, beating analysts' estimates of $24.28 billion.

"I am pleased with the first quarter results that we had -- we delivered solid revenue growth across all of our businesses," explained HP CEO Mark Hurd on a conference call tonight, although he admitted that there is still work to do in storage. "We need to drive stronger top line results in the [storage] business."

On a GAAP basis, HP's earnings per share were 55 cents on net income of $1.8 billion, up from 42 cents and $1.4 billion in the same period last year. The vendor's non-GAAP earnings per share were 65 cents on net income of $2.2 billion, up from $1.7 billion and 48 cents in the fourth quarter of 2005. Analysts had estimated earnings of 64 cents.

HP, stung by recent poor storage performance, formed a new software unit last month in an attempt to boost its data management story. (See HP's New Unit Meant to Spur Storage, HP Forms New Unit, and HP Reshuffles More Software.)The vendor's Enterprise Storage and Servers (ESS) division reported revenue of $4.5 billion, up 5 percent over the same period last year. Storage revenues grew 3 percent year over year, a slight improvement on the previous quarter, thanks largely to 18 percent growth in HP's EVA line of midrange products.

That said, HP is hardly out of the woods -- midrange growth was offset by declines in high-end arrays and sales of tape-based products. (See LTO Maintains Momentum, HP Releases ILM Portfolio, and HP Adds Data Protection.) "We saw poor performance in tape," admitted the CEO. "It's still a substantive part of our business, but it declined faster than we would have liked," he added.

In an attempt to improve this side of the business, HP will be re-investing in its sales operation, and will also attempt better realignment with its resellers, according to Hurd.

Certainly, HP needs to do something to rejuvenate its storage story. The vendor's storage business grew only one 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, HP Reports Q4, HP's Relevant Again, and HP Storage Gets off the Deck.)

Sales of blade servers at least remained strong during Q1, with HP citing a 45 percent hike in blade server revenues. (See HP Adds Storage Blade, HP Unveils Blades, and HP Gets Blade Switch.) "This reflects strong customer acceptance of our c-Class blade offering," explained Hurd.Last year HP unveiled its c-Class family of products, which the vendor is touting as way for users to combine server, storage, and even high-performance computing in a single box. (See HP Brandishes Blades, HP Unveils Blade Design, and A Blade That Cuts Both Ways.)

The HP CEO also used the call to explain that the firm is still in the throes of the restructuring plan it announced last year consolidating 85 data centers worldwide into six larger centers located in three U.S. cities. (See HP Announces Initiative and HP to Consolidate Data Centers.) "We know that we have a lot of work ahead of us," he said. "We're transforming the company, we're not transformed."

HP also raised its full year guidance for 2007 to between $98 and $99 billion, up from $97 billion.

In after-hours trading, shares of HP fell 48 cents (1.11 percent) to $42.65.

James Rogers, Senior Editor Byte and Switch