The new HP: A storage leader?

How is HP's acquisition of Compaq going to affect the new company's storage strategy? Pundits debate the possibilities.

The acquisition of Compaq Computer Corp. by Hewlett-Packard Co., has the pundits pontificating and the speculation mill running overtime. But the question remains: After the dust settles, will the new HP be able to take a top spot in the storage market?

HP and Compaq were tight-lipped on the details yesterday other than to say that they expect to gain a leadership position in storage. "We see tremendous synergies in the storage space," said spokesperson Rebecca Robboy.

The new HP will be structured around four operating units: Imaging and Printing; Access Devices; IT Infrastructure; and Services.

The IT Infrastructure unit, which HP projects will account for $23 billion in revenue, will encompass servers, storage and software.

"From a storage standpoint you have a very strong company in terms of breadth of product line," said John Webster, senior analyst for Nashua, N.H., Illuminata Inc. "I think HP has been struggling to get an independent storage group going," he said.

Webster said HP "confines itself to its own backyard" by selling mostly HP-UX storage. One boost for HP is that Compaq has been able to sell successfully into the Windows2000/NT space for storage while HP has not been able to penetrate that market.

It's a no-brainer according to Michael Karp, senior analyst for Enterprise Management Associates, Boulder, Colo. "The growth in storage dictates that it be a high-priority at the new HP," he said.

But managing the combined HP/Compaq product lines poses a daunting task for the new company. Karp said HP now supports more operating platforms than IBM. "The question is how are they going to be able to provide [storage] management across all of these platforms - right now they can't," he said.

The problem, said Karp, will be trying to merge HP's Federated Storage Area Management (FSAM) strategy with Compaq's VersaStor technology.

"The whole trick in SAN management is to reduce the number of managed objects," said Karp.

Karp said that the merger might actually be beneficial to competitors like IBM. "While the new HP is putting together its policies it will give competitors a chance to focus squarely on where they will compete with HP and further consolidate the position they've already taken. It takes a while for the goodness to accrue," said Karp.

There's still an opening at the top of HP's storage line for a high-end product, but its unclear which products will garner top priority at HP and which will be altered or even discontinued.

"There will be a simplification of product lines across all of the product families," said Michael Capellas, chairman and CEO of Compaq, who will be president of the new HP, at a press conference Tuesday.

Capellas would not announce the complete structured plans for the new company, but said that more information would follow in the coming weeks.

"We knew that we needed to be clear eyed and sober to get this done," said HP Chairman and CEO Carly Fiorina.

Both Fiorina and Capellas agreed this deal makes sense in good times and bad, but that they did not do it because of the economic downturn.

"This is a big damn deal, but we can pull this off," she said.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

FOR MORE INFORMATION:

Check out our searchStorage coverage of the HP/Compaq merger

Merger fact sheet

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