Hewlett-Packard Co., as it prepares to split in two, is
unveiling on Tuesday a plan to help retain important customers by
allowing them to leave behind a processor technology that has found
few takers besides H-P.
The Palo Alto, Calif., company said it would offer versions of
two computer server lines under H-P's Integrity moniker--Superdome
and NonStop--that will be powered by Intel Corp.'s Xeon chips,
which are widely used in other servers from H-P and other vendors.
Its Integrity machines now use Intel's Itanium chips, a specialized
strain of technology that sprang from a joint venture between the
companies two decades ago.
Revenue from these "business-critical" servers, as H-P calls
them, declined 29% in the quarter ended in October over a year
earlier. But Superdome and NonStop servers are still used by banks,
telecommunications carriers and other companies particularly
concerned with reliability.
Such systems accounted for only $929 million in revenue in the
fiscal year ended October 31, dwarfed by the $12.5 billion
generated from more popular x86 servers, but keeping good relations
with customers that use them has other benefits. Such companies buy
software, services and other hardware from H-P that hinges on the
applications running on the Superdome and NonStop machines, said
Patrick Moorhead, an analyst with Moor Insights & Strategy.
"It's about keeping some very high-margin customers," he
said.
Holding on to these customers will be an important factor in
SHYH-SHYP's plans to split the company in half, with one entity
serving enterprises and another handling personal computers and
printers.
"These are a very conservative type of customers--they don't
want to take any risks," said Antonio Neri, senior vice president
and general manager of H-P's enterprise group. "But eventually they
have to move to a new architecture."
He stressed H-P doesn't plan to stop developing Itanium-based
systems but said the benefits of moving to Intel's mainstream Xeon
technology are significant when combined with other enhancements
H-P is offering.
Intel, which introduced its last Itanium model in late 2012, has
disclosed plans for a successor, which is code-named Kittson. The
chip maker hasn't said when that product will arrive nor described
models it may develop after that. Intel, based in Santa Clara,
Calif., gets the bulk of its revenue from chips based on the x86
technology that evolved from personal computers. It announced plans
with H-P to diverge from that approach in 1994, when it faced
competition from a new breed of chips designed by companies like
International Business Machines Corp. and Sun Microsystems Inc.
Itanium chips finally went on sale in 2001 but failed to attract
many customers besides H-P. Meanwhile, Intel kept rapidly improving
its x86 Xeon chips.
H-P's Itanium-based Superdome line, which runs the Unix
operating system, is used by businesses for a variety of heavy-duty
computing chores. The Nonstop line handles more sensitive jobs like
ATM networks and stock exchanges.H-P inherited these
crash-resistant machines from former operations of Tandem Computers
Inc.
Where most servers these days include one to four processor
chips, the two H-P systems compete with machines from IBM and
Oracle Corp. that have many more. The new Superdome model to be
announced Tuesday, for example, has sockets to plug in 16 Xeon
chips and offers nine times the performance of a conventional H-P
system with eight Xeon chips, the company said. H-P has developed
accessory chips and software to speed up communications between
chips and improve reliability.
For the Superdome system, H-P is encouraging customers to move
to the Linux operating system or other software, Mr. Neri said. H-P
is porting NonStop software to run on Xeon chips. The company is
offering services to help customers migrate to the new technology
in both cases.
H-P is announcing the new Xeon-based offerings at an event in
Barcelona that includes software and data storage upgrades. H-P
paid hundreds of millions of dollars to Intel to keep working on
Itanium, according to documents disclosed during the litigation. A
state court judge in California ruled in 2012 that Oracle was
contractually obligated to keep supporting Itanium, a ruling that
Oracle is appealing.
One factor pushing H-P away from Itanium has been reduced
support for the technology by software companies. Oracle, for
example, in March 2011 said it would stop developing new versions
of its popular database software for Itanium-based computers, a
decision that prompted H-P to sue the software maker.
Write to Don Clark at don.clark@wsj.com
Access Investor Kit for Hewlett-Packard Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4282361033
Access Investor Kit for Intel Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4581401001
Access Investor Kit for International Business Machines
Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4592001014
Access Investor Kit for Oracle Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US68389X1054
Subscribe to WSJ: http://online.wsj.com?mod=djnwires