Hewlett-Packard’s announcement of an $8.9 billion quarterly loss is generating a lot of buzz. The vast majority of the loss is the end result of the 2008 acquisition of EDS for $14 billion, softness in PC sales, and $1.8 billion in restructuring charges, among other, less expensive, issues.
But looking at the datacenter component of HP, directly from their third quarter report Enterprise Servers, Storage and Networking (ESSN) revenue declined 4% year over year with a 10.9% operating margin. Networking revenue was up 6%, Industry Standard Servers revenue was down 3%, Business Critical Systems revenue was down 16%, and Storage revenue was down 5% year over year.
It would be easy to say that HPs datacenter sales issues are reflective of the entire industry, but the truth is that the industry continues to expand. And competition in all the key areas of datacenter spending has gotten significantly more intense, not just for the sales of things like traditional datacenter IT hardware, but because of a lot of very innovative design and product that is hitting the datacenter market.
This has changed the way that IT budgets get spent on datacenters. Cutting edge solutions to problems are getting much more traction; Fortune 1000 sized companies are more willing to deal with smaller vendors with innovative approaches to the combined set of facilities and IT issues facing existing and new datacenters. The datacenter market is demanding much more flexibility than it ever has from its vendors, and companies the size of HP, dealing with their own transitional issues, is caught at the crux.
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