HP Clears Obstacles; More Ahead

Although Hewlett-Packard Co. appears to have corrected many of the problems that came to light in the third quarter, some of which resulted in order fulfillment snafus and fewer sales, serious challenges remain.

While announcing fourth-quarter results earlier this month, HP Chairman and CEO Carly Fiorina said errors in the migration of order management operations to a broad SAP AG installation were fixed, as were channel issues that arose in Europe. As a result, the Enterprise Storage and Servers group had a $107 million profit, after losing $208 million the previous quarter.

Click here to read more about HP’s tough third quarter.

“We’ve put the problems of the third quarter behind us,” Fiorina said, in Palo Alto, Calif. However, many say HP is not out of the woods. In addition to corralling its order management system once and for all, HP has to find ways to compete with Dell Inc. on the low end and IBM on the high end, as well as strengthen its storage offerings.

HP officials said the company has been working to address those issues over the past three months, and they point to HP’s creation of a unit for its blade architecture—the BladeSystem division—and the release of new storage devices.

In the short term, the fourth quarter represents “a very solid turnaround,” said Chris Foster, an analyst with Technology Business Research Inc., in Hampton, N.H. However, HP still finds itself squeezed between Dell and IBM, Foster said.

Standardizing on technology from both Intel Corp. and Advanced Micro Devices Inc. lets HP lower its R&D costs and allows it to compete with Dell on price. HP is working to build up its software and services to enable it to offer solutions competitive with IBM, Foster said. Still, both efforts will be challenging, he said.

“Their software business is still very small relative to IBM,” Foster said. “The key here is the need to gain strength in their services and software business.”

Sean Hite, a private IT consultant and a corporate buyer, is now getting shipments of 60 or so HP Compaq nc6000 laptops after months of delays. An HP nx9500 notebook he ordered also took several months to arrive and is now holding off ordering additional units.

“I love HP products, but I was within a couple of weeks or months—if something had not happened—of going to [another vendor],” said Hite in Bourne, Mass. “I’ve got to put boxes on the desks.”

Ed Stanisz, emerging technologies coordinator for the agriculture IT department at Purdue University, said that shipping delays for a 100-server order have been resolved but that it still is taking too long to get desktops.

“Since we lease HP desktops, those delays have not changed,” said Stanisz in West Lafayette, Ind. “Still, four to six weeks, with probably two weeks of that stuck in purchasing.”

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