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HP Storage Takes a Hit

Despite strong overall earnings, Hewlett-Packard Co. (NYSE: HPQ) says storage revenues have dropped since last year. In its report last night, execs said midrange system revenues have been hurt by pricing pressure in the face of an upcoming product cycle (see HP Reports Record Q2).

HP reported $897 million in storage revenues for the quarter -- up 7 percent sequentially but down 3 percent year over year (see In Search of the Missing Uptick). CEO Carly Fiorina says revenues from high-end systems and storage software increased, while tape and midrange systems dropped.

The storage numbers were far less rosy than HPs overall earnings. The company announced revenue of $20.1 billion, up 12 percent year-over-year and 3 percent from the previous quarter.

So what happened with storage? In a conference call with analysts, Fiorina said pricing pressures hurt midrange storage revenues. She said HP discounted prices in anticipation of bringing out new systems this year, but there is speculation that discounts by EMC Corp. (NYSE: EMC)
and perhaps other competitors also squeezed HP. The decline in tape was expected after HP got out of the OEM tape library business last year.

Fiorina said she expects better storage results in the current quarter, following HP's rollout of 30 new or upgraded storage products in recent months. “We do certainly see storage, as an example, improving in the [current] quarter… as storage software continues to grow, as well as some of our high-end products.”

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