HP Searches for Storage Growth

Despite rumblings of a storage slowdown, HP reported a solid set of fourth quarter results last night, posting revenues of $28.3 billion, up 15 percent on the same period last year.

The vendor's quarter four revenues easily beat analyst estimates of $27.4 billion and its earnings also surpassed Wall Street's expectations. On a GAAP basis, HP's earnings were 81 cents on net income of $2.6 billion, up from 60 cents in the same period last year.

HP's non-GAAP earnings were 86 cents on net income of $2.3 billion, compared to 68 cents in the prior-year period, and well above analyst estimates of 82 cents.

Speaking on a conference call last night, HP's CEO Mark Hurd explained that the firm's storage business is heading in the right direction. "Organically, our position improved," he said, pointing to 17 percent year-over-year growth in the vendor's midrange EVA systems."

HP's Enterprise Servers and Storage division continued to report solid growth, posting revenues of $5.2 billion, up 10 percent on the same period last year. Storage revenues grew 7 percent year-over-year, with revenue growth of 6 percent in external disk storage."I continue to think you are going to see growth, more in that low-end midrange area," said Hurd, in response to a question from an analyst on last night's call. "We grew 7 percent here in the quarter and while we feel good about that, we could do better.

"We still have a tape business that is not growing the way we would like, and the high end is still behaving more like the mainframe market," added the exec, alluding to long sales cycles for high end storage.

HP's storage business has typically been a blot on the vendor's financials during recent quarters, although the vendor has started to turn this around in recent months.

Earlier this year, for example, HP formed a new unit within its ESS division, bringing together software from different parts of HP in an attempt to breathe new life into the firm's storage business and boost its data management story.

At least one analyst warns that HP still has some way to go before its storage business is back on track. "Despite strong midrange disk performance, HP continued to have difficulties in some areas," wrote TBR analyst Josh Farina in a guidance note this morning, explaining that HPs high end disk and tape systems declined year-over-year.The analyst also says that the vendor is feeling the pressure from its storage rivals. "HP continues to face tough competition from IBM, which delivered a favorable performance in its high-end storage and tape businesses during 3Q07."

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