HP's Storage Continues to Shine

HP beat analysts estimates with its third quarter results last night, becoming the latest big-name technology vendor to reap the benefits of strong storage growth.

The vendor, which recently threw down $13.9 billion to buy services giant EDS, reported revenue of 28 billion, up 10 percent on the same period last year, and above analyst estimates of $27.4 billion.

HP’s earnings were 80 cents on net income of $2.5 billion, up from 66 cents and $2.1 billion in the third quarter of 2007.

On a non-GAAP basis the vendor’s earnings were 86 cents per share on net income of $2.7 billion, compared to 71 cents and $2.3 billion in the same period last year. Analysts had estimated earnings of 83 cents.

"When you look at the enterprise in the U.S. from a storage perspective, from a software perspective, from a services perspective, from a Blades perspective, this was a really strong quarter for us,” said Mark Hurd, the HP CEO, during a conference call last night. “We think we are executing within the hand that we’ve got available to execute with.”HP is not the only vendor to see an uptick in its storage fortunes recently, as evidenced by recent results from IBM, EMC, and NetApp.

The Palo Alto, Calif.-based vendor’s Enterprise Storage and Servers business reported revenue of $4.7 billion, up 5 percent on the same period last year. This growth was driven mainly by blade servers, which grew a massive 66 percent, and storage, which grew 16 percent.

“Within ESS, storage revenue growth accelerated to 16 percent, driven by 19 percent growth in both our MSA and EVA SAN products,” said Catherine Lesjak, the company’s CFO, during last night’s conference call. “Over the last few quarters, we have launched new products across the portfolio and enhanced our go-to-market model, both of which are helping to improve our storage results.”

Growth within HP’s server business was, however, somewhat less robust, and the company’s revenue from what it describes as "Standard Servers" grew just 2 percent year-over-year, as did the vendor’s Business Critical Systems, which encompasses HP’s Unix offerings.

HP, which also enjoyed a solid second quarter, is now in an enviable cash position thanks to its ongoing revenue growth, according to at least one analyst.“We believe HP is well positioned to ride out economic instability, and the strong cash flow will enable the company to negotiate better terms in a tightening credit market as well as to make acquisitions of weakened competitors,” wrote Technology Business Research analyst Josh Farina, in a note released this morning. “As HP works to close its acquisition of EDS, the company remains focused on driving revenue and profit growth across its segments.”

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