Briefs: May 29, 2006

LENOVO VOWS TO FIGHT IN PRICE WAR

Despite increased profit pressures and competition, Lenovo’s top executives vowed to stay price-competitive, too, while continuing to invest in the U.S. channel, and in sales in Europe and emerging markets. Perhaps signaling tough times with profitability ahead, Lenovo Chairman Yang Yuanqing asked investors to bear with the company.

“I would sincerely hope our investors, when evaluating Lenovo, can have patience to give our management enough time to implement our strategy,” the chairman said. “Within three to five quarters, you will see a new Lenovo with higher growth and profit.”

Overall, Lenovo reported sales of $3.1 billion for the quarter that ended March 31, and a loss of $116 million in the last quarter before the one-year anniversary of the Lenovo-IBM deal. In the year-ago quarter, before that deal closed, Lenovo reported revenue of $607 million and a profit of $21 million.

INTEL EXECUTIVE REAFFIRMS CHANNEL COMMITMENT
An Intel channel executive came out swinging last week, seeking to dispel what she described as several “myths” regarding its technology leadership and channel commitment.

“Let’s be very clear, Intel is a tech leader,” said Shirley Turner, director of North America channel marketing for Intel, during her keynote presentation at XChange Tech Connect. ”[And] we are totally and completely and utterly committed to the success of the channel,” Turner said, pointing to corporate support right up to Intel CEO Paul Otellini.

As evidence, she cited the coming rollout of the Intel Channel Partner Program, which will replace the existing Intel Product Dealer initiative. Under the new effort, system builders that meet certain minimum buying requirements will be entitled to use an Intel logo in their marketing collateral.

Previously, this right was conferred to those carrying the Intel Premier Provider designation. System builders said they have begun hearing about the new program during the past several weeks.

Benefits that will be carried over into the new program include the Intel Channel Connect and Collect effort, which lets VARs and solution providers add T1 and other carrier services to their offerings in exchange for a referral fee of $200 to $250; and the Intel Software Connection, which allies channel partners with smaller ISVs and developers that have applications for vertical markets and the digital home that could be coupled with custom systems.

Turner also touted the recently announced Verified By Intel program, which makes it simpler for system builders to assemble the pieces needed to create a whitebook offering, as a sign of the company’s ongoing commitment to its channel partners. That idea came out of a meeting of the Intel Board of Advisors (composed of about a dozen Intel channel partners) held about two years ago with Otellini.

RESEARCH FIRM OFFERS SERVER REVENUE SNAPSHOT
Dell, which has been aggressively cutting prices, suffered a server revenue drop of 2 percent in the first quarter of 2006, according to numbers reported by Gartner.

Worldwide server shipments for the quarter increased 13.7 percent over the same quarter last year while average worldwide server revenue remained flat, the research firm said.

Worldwide server revenue totaled $12.4 billion in the first quarter of 2006, compared with $12.3 billion in the first quarter last year. Worldwide server shipments totaled nearly 2 million units in the first quarter of 2006, up from 1.7 million units in the same period last year.

Sun Microsystems, meanwhile, returned to server revenue growth for the first time in almost two years, driven by increases in its UltraSPARC and its Opteron-based server revenue.

IBM continued to lead the worldwide server market based on revenue. However, the company’s revenue decreased 3.7 percent in the first quarter, while the total market remained flat for the same period. IBM’s revenue decline was driven primarily by drops in its iSeries, pSeries and zSeries lines. Its x86-based servers outperformed the market, growing 11 percent in revenue for the quarter to provide a degree of counterbalance to the decline.

In server shipments, Hewlett-Packard retained its lead in the first quarter and posted yearly growth of 8 percent. However, this was lower than the overall industry shipment increase of 13.7 percent. HP’s ProLiant servers grew 8.3 percent while HP Integrity Itanium servers grew 29.9 percent for the quarter.

TECH DATA REVENUE DECLINES AMID EUROPEAN RESTRUCTURING
Tech Data last Tuesday reported declined revenue and earnings for its fiscal 2007 first quarter and said that in the current quarter it expects up to $13 million in charges related to a restructuring of its European, Middle East and Africa (EMEA) operations.

For the quarter ended April 30, Tech Data posted sales of $4.94 billion, down from $5.06 billion a year earlier but slightly higher than Thomson Financial/First Call’s analyst projection of $4.93 billion.

First-quarter 2007 earnings came in at $12.9 million, or 23 cents per diluted share, compared with $33.5 million, or 57 cents per share, a year earlier. Analysts had forecast earnings of 32 cents per share, excluding restructuring and other charges.

Tech Data’s sales in the Americas were $2.4 billion, a 4 percent year-over-year increase, and its EMEA sales fell 7.5 percent to $2.6 billion.

HP MAKES A POINT WITH POS BUNDLE FOR SMALL BUSINESS
Hewlett-Packard rolled out a point-of-sales transaction management system bundle aimed at giving SMB solution providers and their retailer customers a one-stop shop for their POS needs.

Lori Grob, product manager for POS solutions at HP, said the package combines the HP rp5000 POS system with Microsoft’s Point Of Sale operating systems and HP-branded peripherals such as printers, touch screens, magnetic-stripe readers and POS keyboards.

Grob said the bundle can be purchased as one package, or pieces can be mixed and matched. HP provides the warranty on all the devices in the package, giving the customer one point of contact in the event of problems and ensuring that all the devices integrate without a hassle.

“Before this, the touch screen would have had to be purchased from one manufacturer and the stripe reader from another, each one with its own warranty,” Grob said. “Maybe they all would work together. Maybe a little bit of fiddling would need to be done.”

The HP rp5000 costs $599 to $820, depending on the configuration. The full bundle will be priced at $2,800, Grob said, and it includes a Microsoft Point Of Sale OS, a magnetic-stripe reader, a receipt printer, a 15-inch touch screen, a cash drawer, a scanner and a spill-proof keyboard. A typical enterprise-class POS package with the same configuration can run as high as $4,000, she said.

Grob said HP will be offering a spif to solution providers that sell the product as well as other financial incentives.