Peter Ryan – HP’s Data Centre Push In EMEA

HP EMEA Highlights

• The trouble with Autonomy has masked its recent performance, which was on a par with its competitors in the business market
• HP’s IT revenues in EMEA are behind Apple and Samsung
• HP Services business is shifting towards core data centre activities
• Will account for technical services business in its separate hardware areas
• Customer wins in HP’s Q4 include service providers in the UK and yet more sales to Kazakhstan
• HP has time to address the softness of its converged device business, but will need to make changes
• Expect a revival in 2013 – especially in data centre and converged infrastructure business

We attended a conference call a few weeks ago with Peter Ryan – Head of HP EMEA – to listen and ask questions about the company’s performance in EMEA. The trouble with the Autonomy acquisition (quite rightly in our opinion) dominated the analysis of its financial year results. However the mass coverage of that issue and the associated significant ‘goodwill impairment’ losses masked its overall results, which were no worse than other systems vendors. We’re predicting that HP will do better in 2013. You’ll be interested to learn about HP’s customer successes in Europe, the results of its HP Discover customer meeting in Frankfurt, as well as our assessment of its market position in EMEA. For an update of HP’s Q2 EMEA business see here.

HP’s Sustaining Data Centre Business

Peter sees lots of challenges in the Euro zone from the recession in many of its countries, but thinks HP has held its own in relative performance against its competitors.
Looking at its Services results he mentions an upcoming change in reporting, as in future it will report technology services as part of the relevant hardware businesses. He notes that HP’s services business is shifting towards core data centre activities, with HP sometimes supporting whole environments including other suppliers’ equipment. Many of its customers have highly-virtualised environments and are moving towards Cloud Computing.
He notes that networking and storage are becoming bigger components of HP’s ESSN (Enterprise Server, Storage and Networking) division and are also giving it higher margins as a result. Business Critical Server business is suffering from the ‘secular decline’ of the Unix operating system. HP won its court case against Oracle, which should result in it continuing to supply versions of its database to HP Integrity (Itanium-based) servers and the introduction of Poulson chips has allowed to increase their performance significantly. He recognises the NonStop server business as ‘niche’, although it is profitable.

HP Focuses On EMEA

Peter ran through HP’s major 4^th quarter customer wins, which included:

• Kazakhstan Temir Zholy is one of a number of customers in this ‘remarkable country’; it is modernising the railway company’s infrastructure, funding and building an outsourced BladeCenter-based data centre and generating revenues from a number of services
• Gradwell (UK) is an Internet hosting company; it is building an IaaS platform based on HP Converged Infrastructure and its CloudAgile Program
• Serco ASP is a UK-based shared service provider working in the healthcare area; HP is supplying a Converged Cloud solution based on its CloudSystem and storage offerings to improve the management of its people, processes, technology and assets.
• Hudson is a UK-based recruitment company; HP is helping it consolidate its European back-office IT infrastructure into its London data centre, improving its disaster recovery and business continuity; it also plans to build a mirrored site for complete redundancy; it claims to have halved its data centre electricity bill by virtualising its physical servers onto virtual ones using HP Proliant blade servers
• Croon is an electrical engineering company in the Netherlands; it has improved data center protection and reduced energy costs by introducing 3Par, LeftHand and StoreOnce backup systems and using HP’s Critical advantage services
• Nakheel is a real estate company based in the UAE; it has implemented an HP Converged Infrastructure solution; components include CloudSystem, SAN arrays and Flex Campus wireless and wired networking

Although only a small part of its business wins in its latest reported quarter, there are a number of common themes here – especially in building international revenues in Kazakhstan and supplying systems to Internet-based operations in the UK. Although few of these could be described as ‘spend to save’ projects, many of the references refer to the reductions in electrical power and increased IT efficiency.
HP also ran its HP Discover conference in Frankfurt, which gave it an opportunity to hear from customers from over 100 countries. It also conducted its ‘global field kick off’ headed up by Meg Whitman and HP’s global leadership team and conducted training and certification of its large account sales and technical support staff in the days leading up to the show.

Sizing HP’s Performance in EMEA

Our research places HP in 3^rd position in EMEA behind Samsung and Apple (see FIgure 2). It leads the server, PC and printer markets and is in 2^nd position in external storage and enterprise/consumer network areas. We’ve summarised its regional market share, revenue and revenue growth in Figure 1. We ‘calendarise’ all vendor revenues – in HP’s case we believe it made $46.8 billion (€36.1 billion) for the year to the end of September 2012.
HP’s largest markets – PC, Outsourcing and Server – all declined in 2012. SaaS and Infrastructure Software saw strong growth, but remain small markets for now. Hardware maintenance and implementation grew. Of the ‘converged infrastructure’ offerings storage and enterprise networks did best, demonstrating the value of buying 3Par and 3Com respectively.
HP has consistently failed to build on its early success with iPaq in the converged device area. It even jettisoned its Palm acquisition after a few quarters, donating its operating system to the Open Source community. Its lack of revenues from MP3 players, smart phones and smart tablets is the main reason for its fall in market position. We think it has excellent opportunities with Windows 8 PC tablets and convertibles, but also needs to address the smart phone and smart tablet areas effectively as soon as possible. To succeed it will need to go beyond its age-old horizontal strategy by taking a more direct responsibility for its user experiences of its products, building an ecosystem and viable app store.

Some Conclusions – Push Data Centre Offerings In EMEA

Although it hasn’t done so yet, we’re concerned that the fall-out from the Autonomy acquisition could yet affect sales – so HP needs to resolve the issues as quickly and efficiently as it can.
As we have seen HP has a major opportunity in the converged device area, where the ebb and fall of successful offerings is shorter than in business computing; but the decision-making process lies with Meg and its global team.
Peter needs to concentrate on HP’s data centre offerings to make a difference to the company’s revenues in EMEA. As always it’s great to hear about customers spending money and HP has been doing reasonably well in the region. We believe its networking and storage offerings will be more competitive in 2013, although a number of smaller suppliers will continue to offer better performance and/or lower prices. Implementing solutions quickly and cutting down payback times, financing or hosting the solutions itself and making money through services will be the order of the year for HP. It is in a good position to ride the economic storms.