Moonshot fails to lift HP's server revenue

HP’s plans to use the low-powered Moonshot servers to rekindle its ailing commodity server business has yet to deliver meaningful benefits

HP’s plans to use the low-powered Moonshot servers to rekindle its ailing commodity server business has yet to deliver meaningful benefits.

In the company’s second quarter financial results, revenue in its commodity server business was 12% lower than the same period last year, while its Itanium business-critical systems revenue was down 37%. The PC business plunged 20%, with commercial PC revenue down by 14% and the consumer PC revenue down by 29%. Enterprise services revenue declined 8% year on year.

Overall, the company reported second quarter net revenue of $27.6bn, down 10% from the prior year.

In a transcript of the earnings call posted on the Seeking Alpha financial blogging site, CEO Meg Whitman said: “We need to do a better job growing the top line and defending our margins.” 

She said Moonshot could revolutionise the economics of the datacentre and was fundamental to HP’s server strategy. “We are confident that Moonshot can redefine the market to HP's advantage,” Whitman added.

Moonshot is HP’s new server family designed for hyperscale computing. HP claims it will enable datacentres to run more servers, using less power. 

“We under-performed in both the Hyperscale and mainstream server markets," said Whitman. "Our under-performance was driven by both market conditions and our own execution. In Hyperscale, we expect Moonshot will give us a differentiated offering, but the transition is going to take time.”

She admitted that HP has around 1,000 customers using its CloudSystem product, which is used for deploying private cloud.

Enterprise services delivered revenue of $6bn, down 8% year on year. IT outsourcing revenue was $3.7bn, down 6% year on year, driven by contractual revenue run-off and pricing pressures. 

Commenting on application and business services revenue, HP chief financial officer Catherine Lesjak said: “We continue to develop our IT in this space, but need to ramp our sales team more aggressively to capture the market opportunity. We saw triple-digit year-over-year growth in our strategic enterprise services revenue such as cloud, security, application modernisation and big data.”

Software revenue was down 3% year on year. “In software, we saw continued challenges in the traditional IT management business, which was particularly weak in Europe,” said Whitman.

Networking revenue was up 1% year on year at $618m. HP expects this to grow as software-defined networking gains momentum.

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