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What good is Number 1?

HP gave guidance on its future during last week's third quarter report, a forecast that could have your vendor breaking the $90 billion sales mark for the first time in company history. The rise of HP's fortunes — its market cap is now doubled in just five quarters — has overturned the dour assessments of former CEO Carly Fiorina's tenure. When she was fired, then replaced by current CEO Mark Hurd, HP didn't say it was taking a new tack for the company's course. Hurd has just made the boat lighter and swifter by digging into the steerage levels and tossing expenses and some employees overboard.

Enough of that metaphor. What's notable about the "approximately" $91.2 billion in sales predicted by HP for fiscal 2006? Analysts say there's a good chance HP will overtake IBM in total sales, at long last, a goal that Fiorina announced like JFK promising a man on the moon by the end of the 1960s.

Question: Is this milestone significant to the 3000 community? One segment, those who've already headed for third party support and intend to follow their own future, probably could care less. The migrating customers, some wary of the future, might consider the No. 1 status as some security blanket against another discontinuance announcement.

No. 1 is fun, and it might bully some customers into sticking with HP as a vendor when their 3000 finally goes dark. But while we congratulate Hurd and HP on breaking to the front of the pack, it's important to look at the source of those sales. One IBM editor thinks that the enterprise is still the place where Big Blue leads the IT world.

Over at the Web site The Four Hundred, editor Timothy Prickett Morgan breaks down the HP and IBM sales numbers — he calls it "pulling apart the numbers" — to figure how much of HP's $91 billion is consumer sales. You know, the mighty printer and ink engine. (I still recall an IBM cheerleader at a Greater Houston RUG conference deriding HP as "Inky.")

Morgan's article, a snapping good read, asserts that HP is still running second to IBM in the enterprise. That may be the only measure that makes any difference to an HP 3000 customer looking for a new environment and vendor. Morgan says:

An iSeries and System i5 reseller with one of the largest OS/400 accounts in the world called me to ask me if HP being the largest IT supplier in the world was important or not, and I said I didn't think so. And then he said his customer said this to him: "I always buy best of breed, and I buy from IBM because it is the dominant supplier. Should I be looking at HP?"

Not if you look at the number of enterprise computing dollars HP is generating, Morgan says. This company is the same one that lets its business segments fend for themselves on profits and growth. The latter measure is the reason given for why HP dropped its 3000 business.

In an especially fun segment, Morgan takes aim at the lead IBM's System i5 (nee iSeries) has over HP's Integrity server business, home of three out of every four Itanium chips:

HP's high-end Integrity server business is dwarfed by even the much-diminished (in terms of revenue) System i5 business. The i5 line is averaging somewhere around $400 million to $500 million a quarter in sales. HP's Integrity line, which runs HP-UX Unix, OpenVMS, Windows, Linux, and NonStop operating systems, brought in $312 million in the last quarter after posting 76 percent growth.

The calculating seems on target over at The Four Hundred, even if Morgan misses his mark by saying that Fiorina "is rarely given the proper credit for seeing that this was, indeed, a smart merger" with Compaq. Fiorina wasted few chances to remind anybody the merger was a good deal, no matter how much stench arose from the proxy battlefield where nearly half of HP's shareholders voted no. The former CEO deserves full credit for cleaving HP down the middle in the most contentious management move in the company's history.

HP's history aside, becoming Number 1 this year might help leverage HP as the incumbent vendor at your shop. Especially when your 3000 cannot pass the boardroom muster anymore, being abandoned by its maker, although not by the community of support and software firms. If there's any doubt about whether HP will stick with HP-UX with more loyalty than it supported MPE/iX into a fourth decade, you can always put up one finger. "Maybe they did make that mistake that cost us," you could say. "But things are different now that they're Number 1."

Or you could shrug and say these horse races are for the pleasure of the investors, to give the CEO something to say to the press and analysts. And note that HP took first place in the year IBM sold off its PC revenues to Lenovo, to keep itself in high profits. If HP did top IBM in enterprise business — well, we'll let Morgan have the last word on that.

Such a change could signal a massive shift away from the traditional host systems that have propped up IBM for decades and to other X64 architectures and new software technologies that are platform-agnostic, and in such a world, IBM will only get its share, not more than its fair share as legacy lock-in allows it to enjoy these days.

Just recall that HP also retains a lot of enterprise business on the strength of legacy lock-in of HP-UX systems, and others. Even the 3000 still contributes, nearly three years after HP stopped selling it. Tens of millions of dollars go to HP for support of those systems, high-profit revenue if there ever was any at HP. Legacy lock in has been good for HP, too.