HP Storage Share Slips

Recent reports indicate Hewlett-Packard Co. (NYSE: HPQ) has lost market share in the external disk storage market, highlighting what appears to be an ongoing fuddle in the company's storage division.

In figures released today, IDC shows HP's share of the worldwide external disk storage system market dropped from 19.3 percent in the first quarter of 2003 to 18 percent in the first quarter of 2004. Its share of worldwide networked storage also dropped from 23.2 percent to 22.8 percent in the same timeframe.

Gartner/Dataquestreported this week that HP has dropped from 18.4 percent to 17 percent share of the worldwide external disk storage market on a year-over-year basis.

To keep matters in perspective, HP's still a top player in storage by IDC's and Gartner's lights. IDC ranks it first in the worldwide disk storage system market, with 23.2 percent worldwide market share. Still, that share was 25.6 percent last year.

But HP's performance in external disk storage systems, of which networked storage is a subset in IDC's taxonomy, doesn't reflect well on the company's efforts, particularly as HP's point-shaving is occurring in the context of a general market upswing (see IDC: Networked Storage Up). What's more, HP's losses seem to be matched by gains for rival EMC Corp. (NYSE: EMC), which toppled HP's top spot in external disk storage this quarter with 20.2 percent, up from 17.1 percent this time last year.Add to all this the lackluster performance HP reported for storage in its latest earnings report (see HP Storage Takes a Hit), and it's easy to see why industry tongues are wagging.

Among the various reasons posited for HP's storage slump, competitive pressures top the list. Several analysts say the company has fallen behind EMC, IBM Corp. (NYSE: IBM), and others in adding trendy new functions, such as virtualization, to their wares. Others, including analyst Roger Cox of Gartner, who authored this week's report, say pricing has had a hand in HP's woes as well.

"We always expect the first quarter to come in below the preceding fourth quarter, but it seems that HP had to discount pretty heavily in the low-end of the midrange segment in the 1Q04," writes Cox in an email today.

An aggressive push into the low end of the market may also have taken a toll. "HP has been selling tons of [product] into SMBs and smaller organizations," says Brad Nisbet, program manager at IDC. But he says that's a mixed blessing, because at the low end, HP isn't dealing with organizations large enough to bring in big-ticket contracts.

Another common refrain is that HP isn't marketing its wares to best advantage. "HP's problems may have less to do with products than marketing. They're not effectively getting their story out there," says Mike Karp, senior analyst at Enterprise Management Associates.HP's official word on all this was released today in a prepared statement from Bob Schultz, senior vice president general manager of HPstorage: "Storage is big business for HP, and we're in it to win it for the long term. HP recognizes the competition in the storage industry is fierce, particularly in the Americas, but we've maintained our leadership positionin total disk storage and have implemented strategies to unify andstrengthen our go-to market initiatives and storage solutions portfolio. Infact, we've just re-loaded our StorageWorks portfolio with innovative newSAN solutions, information lifecycle management and SMB products, plusexpanded sales initiatives to drive future growth."

Mary Jander, Site Editor, Byte and Switch