HP has a very Merry Christmas

The year ended on a high note for many storage companies, but none was higher than the one sounded by HP last week. 

HP’s Enterprise Storage and Servers Group (ESS) announced an operating profit for the company’s fourth quarter of more than $400 million on revenue of $4.5 billion. HP, like IBM, lumps systems and servers in a single group, but it also locates much of its software in ESS as well. Fortunately, when the company reports revenue it breaks things out into numbers that give us useful guidance as to how things are going within each of the ESS sub-segments. As a result, we can see how storage is doing.

As it turns out, HP storage is doing pretty well these days in terms of revenue, margins and profits. Significantly, revenue for the company’s mid-range storage arrays (the EVA line) was up 44%, while the high-end arrays (the XP line, OEMed from Hitachi) saw sales increase by 32%. It’s always good to see a significant bump in home-grown products – after all, that is where we should normally expect HP’s highest margins to be. The value of the EVA contribution to the corporate bottom line should be making people smile as bonus time rolls around.

During the coming year expect HP to show even more interest in information lifecycle management, on growing its share of the small-and-midsize business market, and on growing software revenue. Software will be the key. The acquisition last quarter of AppIQ, the acknowledged industry leader in SMI-S technology, definitely gives HP a leg up when it comes to storage resource management, but SRM has not proven to be the revenue generator that many in the industry had hoped it would be.

For many companies in fact, SRM has proven to be something of a bust, a concept whose ability to deliver value always seems to be just over the horizon. But SRM, or more properly the knowledge required to provide SRM, is becoming a requisite base technology for just about everything else that goes on in storage, enabling just about every aspect of storage management in large enterprise sites. Thus, even if SRM products themselves aren’t profitable, the other technologies they enable may well be. I continue to see the AppIQ acquisition as having been a smart one.

Some of HP’s competitors tried to marginalize HP during the past year. It is obvious now that the marketplace didn’t believe them.