server computer

Bits Blog: Hewlett-Packard’s Look-East Strategy

No one is giving Hewlett-Packard’s chief executive, Léo Apotheker, high marks for the new strategy he presented last week. It seemed a flip from the corporate game plan Mr. Apotheker had championed only a few months earlier. H.P. is paying a high price for a business software company. And it may have undermined the value of its personal computer business by saying it was considering selling it off.

But it’s not hard to see the trends behind the revised thinking at the Silicon Valley headquarters of H.P., as the company retreats from PCs to focus more on selling more profitable data-serving computers and specialized software to corporations and governments — the so-called enterprise business.

Yet H.P.’s strategy also has a familiar look. It’s I.B.M.’s strategy, but embarked upon years later.

A fresh piece of evidence for the logic of an enterprise-first strategy came Tuesday evening. IDC reported that server computer shipments in the second quarter of 2011 increased 8.5 percent and revenue rose 17.9 percent from the year-earlier quarter. By contrast, PC shipments for the quarter inched up 2.6 percent in the quarter, while revenue rose 6 percent.

Companies are investing in servers and data-analysis software to help them handle and make sense of the rising tide of data, generated inside the company and outside — customers, Web traffic, social network communications, and other sources.

I.B.M., headquartered in Armonk, N.Y., sold off its PC business in 2005 to a Chinese company, Lenovo. But I.B.M. did not tip its hand well in advance of the sale, as H.P. felt compelled to do. For months, Samuel J. Palmisano, I.B.M.’s chief, was negotiating with Lenovo and visiting senior government officials in Beijing to get their assent. Word of the deal leaked out just days before I.B.M. announced the sale to Lenovo in December 2004.

The sell-off carried a lot of symbolic freight, for I.B.M. and the PC industry. When it entered the market in 1981, I.B.M. brought the personal computer into the mainstream, endorsing what many still viewed as a plaything for hobbyists.

For years, I.B.M. executives had said — as H.P. executives have — that even if not a big money maker, the PC business was “strategic,” pulling along sales of other hardware, software and services. But Mr. Palmisano made the unsentimental decision to shed the business and invest money and management energy elsewhere.

H.P.’s purchase of Autonomy for $10 billion looks pricey, but the British company is a leading maker of sophisticated data-analysis software. Once again, H.P. is following I.B.M.’s lead. Most of the major software companies have bought specialist makers of software that helps corporations manage information — known as “business intelligence” or “data-analytics” software.

But I.B.M. has been the most aggressive over several years, spending $14 billion on 25 companies that focus on data analytics. I.B.M. has added industry experts in services and researchers to the business, which now employs 8,000 consultants and 200 mathematicians. I.B.M. said recently it expects its analytics business to grow to $16 billion by 2015.

Before I.B.M. sold its PC business and invested heavily in software and services, Big Blue and H.P. were much more comparable companies than they are today. The difference can be seen in the numbers — the data, if you will.

Today, I.B.M.’s profit margins are about double H.P.’s margins. And the stock market value of I.B.M., at $198 billion, is nearly four times H.P.’s $52 billion.

In the last few days, there have been market speculation that H.P. is sufficiently weakened to be a takeover target itself. Oracle has been mentioned as the most likely bidder.

In a research note on Wednesday, Dave Novosel, an analyst at Gimme Credit, said that the only H.P. business that would really interest Oracle would be H.P.’s server computer division. His research note was titled, “Oracle Has Better Options.”

I.B.M. stands on the sidelines, enjoying its competitive advantage. Years ago, it made the difficult strategic choices H.P. is grappling with today.

Article source: http://feeds.nytimes.com/click.phdo?i=d73e5dec344b4ed20765c5713ec564ea

Intel Posts Profit That Beats Forecasts

“This was a very strong quarter across all our product lines and throughout the world,” said Paul S. Otellini, Intel’s chief executive, in a conference call with analysts. “Strong corporate demand for our most advanced technology, the surge of mobile devices and Internet traffic fueling data center growth, and the rapid rise of computing in emerging markets drove record results.”

Intel’s results were also lifted by strong demand from corporations and first-time purchases by customers in China and other emerging markets.

The company, the world’s largest maker of computer chips, said its net income after expenses rose 2 percent to $3 billion, or 54 cents a share, exceeding Wall Street estimates. Revenue increased 21 percent, to $13 billion.

Intel has for several quarters experienced a surge in demand for technology used in data centers, which store and process the huge amounts of information flowing across the Internet. The importance of that market was evident this week as Intel announced plans to acquire Fulcrum Microsystems, a privately held company that designs chips for data center networks. The terms of the deal were not disclosed. Revenue from data centers today accounts for roughly 20 percent of Intel’s sales.

“I fully believe that it is the data center — the cloud — that is driving Intel,” said Patrick Wang, an analyst with Evercore Partners.

Demand for cloud computing is created by the soaring popularity of smartphones and tablets, which provide consumers with continuous, on-the-fly access to the Internet. Mr. Otellini told analysts in May that the technology industry needs one data center server computer for every 600 smartphones in use and one server for every 122 tablets. “We believe we are very early in the cloud build-out and that Intel is well positioned to grow,” Mr. Otellini said. During the second quarter, revenue growth in Intel’s data center group accounted for $2.44 billion.

Wall Street analysts had said earnings would remain flat at 51 cents a share while revenue would increase 19 percent to $12.84 billion. In the same period last year, Intel earned 51 cents a share on revenue of $10.77 billion.

Mr. Otellini said he expected Intel’s revenue to grow in the mid-20 percent range for the year. Revenue will be about $14 billion, Intel said, compared with a forecast of $13.5 billion.

Intel’s gross margin, the percentage of sales excluding production costs, will be about 64 percent, up from 61 percent in the second quarter.

Intel reported that sales in its PC group rose 11 percent, in stark contrast to reports of sluggish PC shipments worldwide. The technology research firm Gartner said last week that shipments grew only 2.3 percent during the second quarter, to 85.2 million computers.

But while Intel has continually confounded skeptics forecasting gloom in the PC market, the company has come under intense criticism lately for stumbling in the market for smartphones, where some analysts worry that it may be too late for Intel to catch up. Products based on a competing chip standard, known as ARM, have quickly dominated the market. Intel is not expected to have a viable alternative on the market for several months.

Stacy J. Smith, Intel’s chief financial officer, said on Wednesday that production of its mobile chip was on track.

The financial report was issued after the close of regular trading Wednesday. Shares of Intel closed at $22.99, then declined slightly in after-hours trading. The second quarter was the first full period that included the results of McAfee and Infineon Wireless, which Intel acquired in the first quarter. Those businesses contributed about $1 billion in revenue during the second quarter.

This article has been revised to reflect the following correction:

Correction: July 20, 2011

An earlier version of this article misstated the percentage increase in Intel’s net income as 10 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=76c235347be1be17de57e0920fd81bb6

Bits Blog: Hewlett-Packard’s Look-East Strategy

Intel Posts Profit That Beats Forecasts

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