Glitches during a SAP supply chain rollout hit
Hewlett-Packard bottom line figures hard, and the fallout
apparently led to the sacking of three HP executives.
While delivering the company's financial results for the
quarter, HP officials reported that the Enterprise Servers and
Storage (ESS) group saw revenue shrink 5% year on year to $3.4bn
(£1.8bn) - in large part due to the troubled software
implementation.
HP said that among other factors such as aggressive discounting,
a US-based "migration to a new order processing and supply chain
system was more disruptive than planned".
"Although we are satisfied with our performance in Personal
Systems, Imaging and Printing, Software and Services, these solid
results were overshadowed by unacceptable execution in Enterprise
Servers and Storage," HP chief executive and chairman Carly Fiorina
said. "We therefore are making immediate management changes."
Fiorina did not specify what those changes were but the company
later announced that three major sales executives, including former
server group head Peter Blackmore, had been fired. Blackmore was
executive vice-president of the Customer Solutions Group (CSG),
which was formed last December to manage direct sales to enterprise
and public-sector customers worldwide
Fiorina announced the changes in an e-mail first sent to HP's
employees, then released to the media.
An HP spokeswoman confirmed that the problematic migration was
based around SAP software.
Fiorina said the problems cost the ESS group about $400m in
revenue and $275m in operating profit.
She said, "We executed poorly on the migration." While the
problems primarily hit HP's Industry Standard Server business, they
also affected the Business Critical and Storage businesses.
Although the company worked to ensure product availability, HP
still lost sales and was forced to fulfill direct orders through
channel partners and expedite other orders via air shipments, moves
that cut into the company's gross margins.
But Fiorina ultimately struck an optimistic note, saying, "We
believe these issues are largely behind us."
The company said Blackmore will be replaced by Mike Winkler,
currently executive vice-president and chief marketing officer.
Winkler will keep those responsibilities in his new role.
Jim Milton, CSG senior vice-president and managing director of
the Americas region, and Kasper Rorsted, CSG senior vice president
and managing director for the Europe, Middle East and Africa
region, were also dismissed.
Milton will be replaced by Jack Novia, senior vice-president and
general manager of HP's Technology Solutions Group. Rorsted's
replacement is Bernard Meric, senior vice-president of HP's Imaging
and Printing Group in EMEA.
The fourth-quarter backlog for ESS amounts to about $120m, but
HP believes its shipping schedule will be back to normal by the end
of the month. Fiorina also predicted the group would be profitable
before the end of the fourth quarter.
HP is a close partner with SAP and offers specialised consulting
services around SAP's supply chain and ERP software.
SAP Americas spokesman William Wohl said the companies have a
"strong and productive relationship, first as a customer and as a
strategic partner. The relationship continues to expand even today,
as teams talk about deepening that customer relationship.
"We can't talk specifically about what's happening inside HP,"
Wohl said, but he indicated that in HP's statements, no blame for
the problems had been attributed to SAP's software.
Marc L Songini writes for Computerworld
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