HP server revenue falls in turbulent quarter, Gartner says

Computerworld - Worldwide server revenue grew 5.2% in the third quarter but declined for Hewlett-Packard (HP), Gartner Inc. said in a report on server sales during the quarter that ended Sept. 30.

HP's quarter was a restless one. It fired one CEO and hired another and left the market wondering whether it was going to sell or spin-off its PC division, a move it later rejected.

In this same quarter, IBM's revenue share of the worldwide server market reached $3.85 billion, a 3.5% increase from a year ago. That gave it 29.7% of the worldwide market, nudging it ahead of HP for the top spot.

HP's server revenue, just over $3.8 billion, declined 3.6% from a year ago, leaving it with 29.3% of the world's market, according to Gartner. Third place Dell, meanwhile, grew 6.3% in server revenue during the period to more than $1.9 billion; it now has 14.7% share of the worldwide market.

Meg Whitman, the former CEO of eBay who was appointed in September as HP's new CEO, told financial analysts last week that HP needs "be simpler, clearer, and more consistent -- no more surprises."

Whitman cited the importance of innovation in selling products. Pointing to HP's recent introduction of low energy servers, Whitman said the company is increasing its investment in research and development.

HP has been hurt by Oracle's decision to discontinue software development on the Itanium processor, the company acknowledged.

"Our ability to close deals has been impacted by Oracle's Itanium decision," said HP's CFO, Cathie Lesjak, said during last week's call.

Gartner said that RISC-based systems and Itanium servers declined 6.8% worldwide, but vendors overall saw revenues increase 3.5%. Oracle Corp., which picked up Sun Microsystems' SPARC line, was in fourth place in revenue on Gartner's list, with nearly $764 million in server revenue. It had 6.2% of the market, unchanged from a year ago.

When measured by server shipments, HP saw a 3.1% decline in the third quarter to 693,265 shipments. It remains the leader in that category, followed by Dell, which increased shipments by 3.2%, to 517,867, and IBM, which saw no percentage change in shipments. IBM had 287,507 shipments, according to Gartner.

Market share as measured by shipments put HP at 29.2% of the market, Dell, 21.8% and IBM, 12.1%, Gartner said.

In Western Europe, beset by a financial crisis, server sales fell nearly 5%; that decline was offset by gains in other regions, including in Eastern Europe.

Jeffrey Hewitt, research vice president at Gartner, said that he can't definitely attribute HP's server revenue decline to its board level issues, but said it is possible that some businesses held off on orders in response. He cited other issues affecting HP's server sales, namely the decline in Unix and Oracle's Itanium decision, as contributing factors as well.

Unix, RISC and Itanium server revenue for HP fell 18.5% in the quarter, while IBM revenue grew by 27%. Oracle revenue in this category fell 11.6%, according to Gartner.

Hewitt said HP's third quarter "is likely to be something of a temporary glitch" that he expects the company to move past.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

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