HP Sees Profit in Enterprise Systems

Hewlett-Packard Wednesday said all its business units are in the black for the first time since its merger with Compaq.

As usual, the Palo Alto, Calif., company’s imaging and printing business drove the fourth-quarter revenue to $19.9 billion and earnings per share to 36 cents. Analysts surveyed by Thomson Fist Call expected revenues of $19.2 billion and earnings of 35 cents per share.

But the IT giant was pleasantly surprised by enterprise systems sales. The group, responsible for servers, storage and IT software, posted revenue of $4.1 billion, up 2 percent year-over-year and 10 percent sequentially.

“By any measure, we hit our stride and demonstrated what the merger was all about,” chairman and CEO Carly Fiorina said in a statement. “We did all of this while strengthening our direct sales, service and support capabilities and investing more than $1 billion in software, $600 million in the HP brand, $400 million in our IT systems and $275 million in training and developing our people.”

Fiorina said industry-standard server revenue increased 9 percent year-over-year to record revenues, driven by unit growth of 21 percent. HP extended its lead in the x86 market, regaining the U.S. market share lead, and closing the quarter with 32 percent worldwide share.

Analysts were impressed with the turnaround.

“We have modeled an (enterprise server group) operating profit of $40 million driven by strong sales in each platform category — Windows servers, Linux systems and high-end UNIX products. We believe that HP gained share in Linux and is likely to have also gained share in UNIX systems,” AmTech Research analyst Ray Young told internetnews.com.

HP’s share of the industry-standard server market is above 50 percent in 15 countries, more than the two nearest competitors combined in Europe. HP also leads the x86 Linux market with 26 percent worldwide share.

HP Superdome shipments set another record for the quarter, with units shipped increasing 17 percent year-over-year. Midrange and low-end UNIX stabilized and were both essentially flat year-over-year.

Gartner Dataquest says HP also regained the top spot in total server shipments in the United States during the quarter with 26.6 percent of total shipments. HP’s U.S. server shipments grew faster than the market, with 10 percent sequential growth and 28 percent growth year-over-year.

The company’s other sweet spot was storage. HP said its enterprise array offerings grew 109 percent in the flagship midrange and 14 percent in the high-end year-over-year. The tape business declined 14 percent as HP exited the OEM library business.

HP also said its enterprise software revenue grew 20 percent year-over-year to a new record, with OpenView up 17 percent and OpenCall gaining 36 percent.

The news was not good for all of HP brands as its high-end UNIX units declined 10 percent. Both NonStop and Alpha servers also slipped in the mid-single digits.

Going forward, HP said revenues should range from $19.1 billion to $19.5 billion in its first fiscal quarter of 2004, compared to current consensus of $19 billion, reflecting 2 percent to 4 percent seasonal revenue decline. The company expects earnings of 35-cents per share, in line with Wall Street estimates.