HP 3000 group tightens upgrade licenses
Candidate questions for OpenMPE

HP Q1 results impress analysts

HP reported that it earned solid profits and posted record sales during the first quarter of its 2008  fiscal year, led by solid performance in the company's laptop sales and an 11 percent sales climb in services. Services is the arm of HP which is still collecting revenues from HP 3000 customers as well as posting profits. While the 3000 totals of both represent a tiny fraction of HP's $28.5 billion in Q1 sales and $ 2.1 billion of profit, the server for which HP canceled its plans for during 2001 still drives money straight down to HP's bottom line.

HP announced that it shipped its 500 millionth printer during the quarter, a sales total that goes back 24 years from the start of the LaserJet era, and even farther back if you count the line printers of the 1980s connected to the HP 3000, such as the massive 2680s. HP said its printer and imaging unit posted a 4 percent sales increase, while PCs, enterprise servers, services and software all grew faster. Much of the Q&A with market analysts explored the future of the printer business. But overall, the market mavens were impressed with the past 90 days of HP's operations.

In a discussion with analysts after the market closed yesterday, HP updated its datacenter consolidation project, an effort which includes the MPE/iX servers which continue to service HP's needs. CEO Mark Hurd said that the magnitude of HP's data operations put the project about at the halfway point, after three years of work.

We were running the company in early 2005 on roughly 6000 applications. [CFO] Cathie Lesjak and I looked at this about a week ago; we’re running the company right now on a little more than 3000 applications. So we’re about halfway through the application consolidation.  It really starts with us with a process change, then an application consolidation and application modernization process, and then that allows us to consolidate infrastructure, and therefore close data centers.

HP had planned to get most of its consolidation completed during this year, but it appears to be running behind plans. HP expects, as do many HP 3000 migrating sites, to increase the amount of innovation it gets from every IT dollar spent by 2009. But HP isn't counting on advancing technology as much as reducing maintenance costs. Lesjak said HP expects to have a run rate savings of $1 billion by that year for the company which runs at a $110 billion rate yearly.

Maybe even more significant for the 3000 customer who's sticking with HP's Unix solutions, the vendor is turning toward an in-house sales force to bolster its distribution. HP added 2,000 salespeople to its ranks, and Lesjak said "We think we have a just superb lineup of products and capabilities. And it's frustrating to us because we, obviously, know we come to work every day and then under-distribute them in the market."

HP 3000 customers who recall the 1980s model often mark the rise of the resellers as the start of Hewlett-Packard's customer service decline. The results have been a success for the company's overall financial picture, however.

With 144,000 partners and resellers helping HP, the reseller-based model which started with those HP printers might have been maxed out, given HP's frustration with being "dramatically undercovered." The new focus on salespeople could benefit 3000 sites. For specialized solutions such as Integrity and the HP-UX environment, an HP salesperson could be the best way to ensure those products enjoy a growing base of customers, and so protect an HP-UX investment.

Much of the success in such enterprise servers appears to be coming from HP systems running Intel's Xeon processors and using Windows. When pressed, Hurd reported that unit sales growth for its Industry Standard Servers — not its Integrity/Unix solutions — was in the "high teens" of percentage for Q1.

Business Critical Systems revenues, in contrast, posted only a 1 percent increase from the first quarter of 2007. Integrity revenues were up 37 percent and now represent 75 percent of BCS revenue.

Hurd was upbeat about the quarter to come for HP. The company is increasing its prediction of earnings per share for the 10th consecutive quarter — a period which is entirely inside Hurd's tenure as CEO. "HP had a strong quarter, he said. It was characterized by balanced growth across all regions, share gains in key businesses, margin expansion, expense discipline, strong cash flow from operations, and significant share repurchases."

HP has created more than $50 billion in shareholder value during Hurd's term. Results from the period pushed the stock above the $47 per share mark, about 10 percent under the 52-week high. The HP numbers pulled up the technology sector's trading overall for the day, countering less-sunny to gloomy forecasts in recent weeks from Google, Microsoft and Cisco.

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