Server 2003 refresh set to drive x86 server renewal at HP

HP posted $27.6bn revenue in Q3 2014, driven by growth in commercial PCs and the company’s x86 industry standard service business

HP posted revenue of $27.6bn for Q3 2014, driven by growth in commercial PCs and the company’s x86 industry standard service business.

In a transcript of the earnings call on the SeekingAlpha financial site, HP CEO Meg Whitman said: "In personal systems, we had an excellent performance, with revenue up 12% from the prior year period. In industry standard servers, we saw 9% growth from the prior year period, which represents our fourth consecutive quarter of revenue growth."

HP’s converged storage grew by 9% while traditional storage declined by 14%. Overall storage revenue fell by 4% year-on-year. "3PAR returned to double-digit growth, and we continue to gain share in the mid-range," said Whitman.

Revenue in networking products grew 4% and Whitman added: "We  saw good growth in switching, where we once again outperformed Cisco."

In its services business, outsourcing revenue was $3.5bn, down 8% year-on-year, while applications and business services revenue was $2.1bn, down 4%.

Whitman also discussed HP's public cloud offering. “By the end of October, we expect to deliver commercial versions of HP Helion OpenStack and the HP Helion Development platform, which will help enterprise customers build and deploy OpenStack-based clouds,” she said.

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The  HP Helion Network, announced in June, is a global public cloud platform for the enterprise supported by AT&T, British Telecom, Intel, Synapsis and Hong Kong Telecom.

Commenting on the results, analyst firm TBR said: "We believe HP is taking the necessary steps towards performance improvements over the long term. We anticipate HP Services will return to more stable and consistent revenue growth in 2016 as Helion becomes more widely adopted and HP continues to make R&D investments in growing areas of technology – cloud, analytics, security and mobility."

Whitman also discussed new areas of research at HP. "Martin Fink has focused the HP lab researchers on memristors, photonics and a new operating system at the heart of this once-in-a-generation project," she said. "I believe we are clearly demonstrating what I said many times before, that innovation is alive and well at HP. Over the next several months, you can expect to see the introduction of game-changing products in personal systems, servers, cloud and printing, that are going to bring some real excitement to these markets."

The company has benefited from the end of support of Windows XP to drive the replacement of PCs. HP expects server growth to be impacted positively by the end of support of Windows Server 2003 in July 2015.

In the transcript of the earnings call, HP CFO Cathy Lesiak said: "We think the Windows Server 2003 upgrade is an opportunity for us. There is a significant number of servers in the installed base and they are going to have to upgrade. So there is some similarity between the XP upgrade and the server upgrade, and so we’re following the same programme from a marketing perspective."

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