Whitman: HP Set To Pounce On IBM-Lenovo Instability

Hewlett-Packard CEO Meg Whitman Thursday said the computer giant is set to pounce on a bid to grab server share from IBM Lenovo in the wake of the instability caused by IBM's $2.3 billion sale of its x86 server business to Chinese computer giant Lenovo.

"The good news is that this does create an opportunity for us," said Whitman in a conference call with Wall Street analysts after HP posted better-than-expected results for its first fiscal quarter ended Jan. 31. "What I have learned about this business is instability and questions about the future make it very difficult [for customers]. People want to bet on a road map, and they are worried that as a change of ownership occurs, is the road map the same? Are the investments the same? Is the go-to-market going to be the same? Is the service going to be the same? I think we have a near-term opportunity to gain share in our server business. We are all over it! We are all over it with our channel partners, and I think there is a good near-term opportunity."

[Related: What Could The IBM-Lenovo Deal Mean For The Server, Storage Industries? ]

HP, in fact, is readying a channel offensive aimed at grabbing IBM x86 server share, said Jim Ganthier, vice president of global marketing for HP Servers. "A lot of people [inside HP] are seeing this as a huge opportunity for the channel," he said in an interview with CRN. "We'll be making our public moves very shortly." The IBM x86 server sale has put IBM's "entire [server] line into question," said Ganthier. "That creates huge uncertainty for channel partners. For channel partners looking for a rock-solid island, someone that cannot only show commitment today but in the future, the answer is HP."

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The HP offensive comes as HP picks up momentum in the server market with HP industry-standard sever sales up 6 percent in its first fiscal quarter ended Jan.31.

HP's worldwide x86 server shipments grew 9 percent year-over-year in the fourth quarter of 2013, compared with a huge 20.3 percent drop in shipments for IBM and a 5.4 percent drop in shipments for Dell, according to the IDC estimates, which were viewed by CRN.

Overall, HP captured the top spot in the worldwide x86 server unit market share, with 29.9 percent share in the fourth quarter compared with 21.1 percent market share for Dell, 8.8 percent market share for IBM, and 3 percent market share for Cisco, according to the preliminary IDC data.

NEXT: HP Partner Nth Generation On Taking Share From IBM

Rich Baldwin, CIO and chief strategy officer at Nth Generation Computing, a San Diego-based HP enterprise partner, said that Nth and HP have been grabbing server sales from IBM even before Lenovo officially announced it would buy IBM's x86 server business.

Nth has not seen a spike in new IBM server takeouts since the announcement, mainly because it is more likely to run into Dell or Cisco as a competitor in its area, Baldwin said. "IBM is the easiest to beat for server sales," he said. "Cisco is the hardest. But our HP server business overall is up just like HP's is."

Nth's storage business also is growing quickly compared to HP's flat year-over-year growth, said Baldwin. He said that HP's flat growth in storage is most likely due to a huge shift in sales from HP's legacy EVA line to its 3PAR storage line.

"EVA had a very large installed base," he said. "Some customers are still happy. EVA still works, so we're seeing some add-on business. But we're seeing a large part of the business moving to 3PAR, mainly the 7000 series, which is at the lower end of that line. When HP first bought 3PAR, prices were significantly higher. Now the business is taking off with its lower-end products, which cost maybe one-fourth or one-third the price," Baldwin said.

The robust HP industry-standard server sales come with the company showing signs that its turnaround is on track, posting better-than-expected results for its first fiscal quarter ended Jan. 31.

HP reported GAAP diluted net earnings per share of 90 cents, well above the Wall Street consensus of 84 cents per share and up 10 percent from the year-ago quarter.

Bolstered by increases in industry-standard server and personal system sales, HP reported sales for the quarter of $28.2 billion, above the Wall Street consensus of $27.19 billion, but down 1 percent from the prior-year period.

HP's Enterprise Group sales in the quarter, which includes servers, storage and networking, was overall up 1 percent to $6.99 billion compared to $6.94 billion in the year-ago quarter.

Whitman, for her part, sees the Enterprise Group business turnaround taking hold. "You can see it in the ISS [industry standard server] revenues as well as networking and storage," she said.

HP's networking sales were up overall 4 percent in the quarter, as the company competed especially well with Cisco in the switching business with HP network switch business up 5 percent in the quarter, said Whitman.

"We are on it," she said of the Enterprise Group offensive. "We have got the right people on it. I think you'll see margin improvement over the course of the year if the market holds up and we can continue to execute."

With a rapid shift toward disruptive new-style information technology solutions, Whitman said HP may start to look at small to midsize acquisitions to gain a competitive advantage.

"As this market changes very dramatically, you can see that we may need acquisitions in security, big data mobility and cloud," said Whitman. "We will be very judicious. It will be returns-based."

Joseph F. Kovar contributed to this story.