Article

Users welcome HP shakeup

Jo Maitland, Senior Executive Editor

"Asleep at the wheel" are the words most people use to describe HP's storage business over the past few years. But now that Carly Fiorina has gone, analysts and users alike are hoping that a fresh strategy will revitalize the business.

Many Wall Street analysts, notably Steven Milunovich of Merrill Lynch, have called for a breakup of the company. HP's strategy to date has been to sell everything from printers to MP3 players to global services, which has irked many investors who complain that valuable assets inside of HP, like the printer business, are weighed down by less profitable groups, like the PC unit. Splitting up the company would unlock the different assets, enabling them to focus more, and ultimately provide better products and services. At least that's the theory.

"The long-term probability of a breakup of the company is rising, despite indications from the board that no such move is currently planned," said Milunovich, in a note to investors on Wednesday. For now, HP's board of directors is saying that the plan is to keep the business portfolio intact, but the word is that once a new CEO is in place, this will change.

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"They've offered a little bit of everything but not been good at any one thing … Even HP shops are not using HP storage," said Ken Krutsch, storage consultant with Krutsch Associates Inc.

In a conference call on Wednesday, the company's interim CEO Bob Wayman voiced his concern. "Storage has been losing market share, and we fell a lot behind in terms of the product roadmap," he said.

Users lose faith
Jack Eckerd, director of information systems at Specialty Bakers, based in Marysville, Pa., has been an HP tape drive user for years. "Those HP machines are indestructible," but he said the service has been going downhill. "Since the merger with Compaq, we've had to phone in for tech support, which always takes too long … We might get faster service if they break the company up."

A large IT outsourcing company known for providing disaster recovery services is considering an alternative storage vendor as we speak. "This is the final straw for us. We are an HP shop and cannot withstand any more disruption," said the company's senior storage architect. He agreed to be quoted on condition of anonymity.

Priority Health Corp. has 64 terabytes of raw storage spread across a multitude of HP storage platforms, and is primarily an HP server and storage shop. Jake Roersma, SAN administrator at Priority Health agrees with the analysts. "The ability to focus on a single area would definitely benefit both HP and the customer. I would assume that HP would keep both the server and storage together. Where we see the value in HP is its ability to incorporate knowledge from one into the other. If that synergy were gone, there might be some concern."

Other users have cited problems getting orders filled. During the past year, HP has been besieged by problems with order management and supply chain issues in Europe.

Steve Duplessie, founder and senior analyst with the Enterprise Strategy Group, summed up Fiorina's departure this way: "Carly talked about how strategic storage was but never really did anything to back up the statement other than let good people leave, time and time again. The fact of the matter is HP storage is a massive but declining business."

On a positive note Duplessie said, "HP still has a huge installed base that it can cultivate and grow. If it were to put some wood behind the storage arrow -- hire some smart people, get some new products out the door, and put a real emphasis on selling them -- it will be fine."


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