The Final 3000 Quarter at Hewlett-Packard
January 31, 2014
It's the final day of HP's Q1 for 2014, so in about three weeks we'll know how the company has fared in its turnaround. Analyst sites are rating the stock as a hold, or giving the company a C+ rating. It's instructive to see how much has changed from the final quarter when 3000 customers sent measurable revenues to Hewlett-Packard.
That would be the Q1 of 2009, including the final two months of HP's regular systems support sales of November-December of 2008. At the end of '08 HP closed its MPE/iX and 3000 lab. And without a lab, there was no way business critical support would offer much of an incentive to keep HP's support in a 3000 shop's IT budget.
The customers' shake-off of HP's support revenue didn't happen immediately, of course. People had signed multi-year contracts for support with the vendor. But during the start of this financial period of five years ago, there was no clear reason to expect HP to be improve for MPE/iX, even in dire circumstances. Vintage support was the only product left to buy for a 3000 through the end of 2010.
In Q1 of 2009, HP reported $28.2 billion in total sales. In its latest quarter, that number was $29.1 billion. Nearly five years have delivered only $900 million in extra sales per quarter, despite swallowing up EDS and its 140,000 consultants and billions in sales, or purchasing tens of billions of dollars worth of outside companies like Autonomy.
In January of 2009, HP 3000 revenues were even more invisible than the Business Critical Systems revenues of today. But BCS totals back then were still skidding by 15-20 percent per quarter, 20 quarters ago. And even in 2009, selling these alternatives to an HP 3000 was generating only 4 percent of the Enterprise Server group's sales. Yes, all of enterprise servers made up 2.5 percent of the 2009 HP Q1. But that hardware and networking is the short tail of the beast that was HP's server business, including the 3000. Support is the long tail, one that stretched to the end of 2008 for MPE, more than seven years HP announced the end of its 3000 business plans.
It's easy to say that the HP 3000 meant a lot to HP's fortunes. In a way it certainly did, because there was no significant business computing product line until MPE started to get stable in 1974. But the profits really didn't flow off the hardware using that 20th Century model. Support was the big earner, as the mob says of anybody who returns profits to the head of the organization. HP 3000 support was always a good earner, right up to the time HP closed down those labs and sent its wizards packing, or into other company divisions.
It had been a small business all along, this HP 3000. A billion dollars was a great quarter's worth, and the 3000 division never came close. But all of HP's business critical servers together only managed $700 million in sales -- five years ago. The profits from such customers were only significant because of support relationships. This is why those contracts were the last thing HP terminated.
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