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HP's big iron back in the black

Servers, storage up but Alpha, NonStop decline

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After swimming in an ocean of red ink since the merger with Compaq, Hewlett Packard's enterprise system group recorded a profit of $106 million.

Overall HP recorded pre-tax profits of $1.43 billion on revenue of $19.85 billion, largely powered by a billion dollar profit (on income of $6.2 billion) from the printing division, over half of which, at 53 per cent, was ink and other supplies.

The PC business, which is a cut-throat price war with Dell, saw increased volumes with notebook shipments up 53 per cent year on year, but only registered a profit of $21 million on sales of $6 billion. CFO Bob Wayman said that he'd have to wait until the holiday season was over to see what the real sell-through would be.

But the enterprise group will be relieved to have turned the corner. HP grabbed the server crown from Dell in the last quarter, and executives said the Unix and low-end businesses had "stablized". Intel servers consisted of 47 per cent of revenue, storage 25 per cent and the high end and Unix systems 23 per cent. CEO Carly Fiorina cited figures suggesting HP had 34 per cent share of Linux servers.

Alpha and Tandem revenues declined "but a little less than what we had built into our model," said Wayman. "There is no rapid migration going on. We always assumed that some of the Alpha base would be lost".

Intel's Itanium was not mentioned in the earnings release except as a trademark acknowledgement (check those boilerplates next time, folks), making it something of a ghost ship. Superdome shipments were up 17 per cent over the preceding quarter, and HP said it shipped 50,000 blades.

Executives promised to cut costs further, in particular to "reduce dependence on outside resources." Travel restrictions will remain, said CFO, suggesting the freeze maybe permanent - for all those who don't have access to the Air Force. ®

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