Category Archives: hp

Server shipments decline as customers float towards cloud

Gartner reports that worldwide server shipments have declined by 4.2% in the first quarter of 2017.

Not a surprise considering the growth in cloud adoption but there are several points of interest.

One is that although Hewlett Packard Enterprise (HPE) is still ahead in revenue (over $3 billion revenue and 24% market share), Dell EMC is catching up, still number two with 19% share but posting growth of 4.5% versus 8.7% decline for HPE.

In unit shipments, Dell EMC is now fractionally ahead, with 17.9% market share and growth of 0.5% versus HPE at 16.8% and decline of 16.7%.

Clearly Dell is doing something right where HPE is not, possibly through synergy with its acquisition of storage vendor EMC (announced October 2015, completed September 2016).

The larger picture though is not great for server vendors. Businesses are buying fewer servers since cloud-hosted servers or services are a good alternative. For example, SMBs who in the past might run Exchange are tending to migrate to Office 365 or perhaps G Suite (Google apps). Maybe there is still a local server for Active Directory and file server duties, or maybe just a NAS (Networked Attached Storage).

It follows that the big cloud providers are buying more servers but such is their size that they do not need to buy from Dell or HPE, they can go directly to ODMs (Original Design Manufacturers) and tailor the hardware to their exact needs.

Does that mean you should think twice before buying new servers? Well, it is always a good idea to think twice, but it is worth noting that going cloud is not always the best option. Local servers can be much cheaper than cloud VMs as well as giving you complete control over your environment. Doing the sums is not easy and there are plenty of “it depends”, but it is wrong to assume that cloud is always the right answer.

My last server? HP ML310e G8 quick review

Do small businesses still need a server? In my case, I do still run a couple, mainly for trying out new releases of server products like Windows Server 2012 R2, System Center 2012, Exchange and SharePoint. The ability to quickly run up VMs for testing software is of huge value; you can do this with just a desktop but running a dedicated hypervisor is convenient.

My servers run Hyper-V Server 2012 R2, the free version, which is essentially Server Core with just the Hyper-V role installed. I have licenses for full Windows server but have stuck with the free one partly because I like the idea of running a hypervisor that is stripped down as far as possible, and partly because dealing with Server Core has been educational; it forces you into the command line and PowerShell, which is no bad thing.

Over the years I have bought several of HP’s budget servers and have been impressed; they are inexpensive, especially if you look out for “top value” deals, and work reliably. In the past I’ve picked the ML110 range but this is now discontinued (though the G7 is still around if you need it); the main choice is either the small Proliant Gen8 MicroServer which packs in space for 4 SATA drives and up to 16GB RAM via 2 PC3 DDR3 DIMM slots and support for the dual-core Intel Celeron G1610T or Pentium G2020T; or the larger ML310 Gen8 series with space for 4 3.5" or 8 small format SATA drives and 4 PC3 DDR3 DIMM slots for up to 32GB RAM, with support for the Core i3 or Xeon E3 processors with up to 4 cores. Both use the Intel C204 chipset.

I picked the ML310e because a 4-core processor with 32GB RAM is gold for use with a hypervisor. There is not a huge difference in cost. While in a production environment it probably makes sense to use the official HP parts, I used non-HP RAM and paid around £600 plus VAT for a system with a Xeon  E3-1220v2 4-core CPU, 32GB RAM, and 500GB drive. I stuck in two budget 2Tb SATA drives to make up a decent server for less than £800 all-in; it will probably last three years or more.

There is now an HP ML310e Gen 8 v2 which might partly explain why the first version is on offer for a low price; the differences do not seem substantial except that version 2 has two USB 3.0 ports on the rear in place of four USB 2.0 ports and supports Xeon E3 v3.

Will I replace this server? The shift to the cloud means that I may not bother. I was not even sure about this one. You can run up VMs in the cloud easily, on Amazon ECC or Microsoft Azure, and for test and development that may be all you need. That said, I like the freedom to try things out without worrying about subscription costs. I have also learned a lot by setting up systems that would normally be run by larger businesses; it has given me better understanding of the problems IT administrators encounter.

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So how is the server? It is just another box of course, but feels well made. There is an annoying lock on the front cover; you can’t remove the side panel unless this is unlocked, and you can’t remove the key unless it is locked, so the solution if you do not need this little bit of physical security is to leave the key in the lock. It does not seem worth much to me since a miscreant could easily steal the entire server and rip off the panel at leisure.

On the front you get 4 USB 2.0 ports, UID LED button, NIC activity LED, system health LED and power button.

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The main purpose of the UID (Unit Identifier) button is to help identify your server from the rear if it is in a rack. You press the button on the front and an LED lights at the rear. Not that much use in a micro tower server.

Remove the front panel and you can see the drive cage:

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Hard drives are in caddies which are easily pulled out for replacement. However note the “Non hot plug” on these units; you must turn the server off first.

You might think that you have to buy HP drives which come packaged in caddies. This is not so; if you remove one of the caddies you find it is not just a blank, but allows any standard 3.5" drive to be installed. The metal brackets in the image below are removed and you just stick the drive in their place and screw the side panels on.

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Take the side panel off and you will see a tidy construction with the 350w power supply, 4 DIMM slots, 4 PCI Express slots (one x16, two x8, one x4), and a transparent plastic baffle that ensures correct air flow.

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The baffle is easily removed.

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What you see is pretty much as it is out of the box, but with RAM fitted, two additional drives, and a PCIX USB 3.0 card fitted since (annoyingly) the server comes with USB 2.0 only – fixed in the version 2 edition.

On the rear are four more USB 2.0 ports, two 1GB NIC ports, a blank where a dedicated ILO (Integrated Lights Out) port would be, video and serial connector.

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Although there is no ILO port on my server, ILO is installed. The luggage label shows the DNS name you need to access it. If you can’t get at the label, you can look at your DHCP server and see what address has been allocated to ILOxxxxxxxxx and use that. Once you log in with a web browser you can change this to a fixed IP address; probably a good idea in case, in a crisis, the DHCP server is not working right.

ILO is one of the best things about HP servers. It is a little embedded system, isolated from whatever is installed on the server, which gets you access to status and troubleshooting information.

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Its best feature is the remote console which gives you access to a virtual screen, keyboard and mouse so you can get into your OS from a remote session even when the usual remote access techniques are not working. There are now .NET and mobile options as well as Java.

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Unfortunately there is a catch. Try to use this an a license will be demanded.

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However, you can sign up for an evaluation that works for a few weeks. In other words, your first disaster is free; after that you have to pay. The license covers several servers and is not good value for an individual one.

Everything is fine on the hardware side, but what about the OS install? This is where things went a bit wrong. HP has a system called Intelligent Provisioning built in. You pop your OS install media in the DVD drive (or there are options for network install), run a wizard, and Intelligent Provisioning will update its firmware, set up RAID, and install your OS with the necessary drivers and HP management utilities included.

I don’t normally bother with all this but I thought I should give it a try. Unfortunately Server 2012 R2 is not supported, but I tried it for Server 2012 x64, hoping this would also work with Hyper-V Server, but no go; failed with unattend script error.

Next I set up RAID manually using the nice HP management utility in the BIOS and tried to install using the storage drivers saved to a USB pen drive. It seemed to work but was not stable; it would sometimes fail to boot, and sometimes you could log on and do a few things but Windows would crash with a Kernel_Security_Check_Failure.

Memory problems? Drive problems? It was not clear; but I decided to disable embedded RAID in the BIOS and use standard AHCI SATA. Install proceeded perfectly with no need for additional drivers, and the OS is 100% stable.

I did not want to give up RAID though, so wondered if I could use Storage Spaces on Hyper-V Server. Apparently you can. I joined the Hyper-V Server to my domain and then used Server Manager remotely to create a Storage Pool from my pair of 2TB drives, and then a mirrored virtual disk.

My OS drive is not on resilient storage but I am not too concerned about that. I can backup the OS (wbadmin works), and since it does nothing more than run Hyper-V, recovery should be straightforward if necessary.

After that I moved across some VMs using a combination of Move and Export with no real issues, other than finding Move too slow on my system when you have a large VHD to copy.

The server overall seems a good bargain; HP may have problems overall, but the department that turns out budget servers seems to do an excellent job. My only complaint so far is the failure of the storage drivers on Server 2012 R2, which HP will I hope fix with an update.

HP goes Android: what does that say about Windows 8?

Here at Mobile World Congress in Barcelona HP has announced a 7” Android tablet which will be available in April.

I took a quick look at the Mobile Focus event today. The back of the device is more interesting, showing logos for HP and for Beats Audio.

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From the front you would be pushed to distinguish it from, say, Google’s Nexus 7. Black screen, runs Android.

I asked the guy on the stand what is distinctive about HP’s little Android slate in a crowded market. He said it had above average build quality, above average sound thanks to Beats Audio (you can find this discussed here), and support for HP’s printing system.

Not much, in other words; but the more interesting question is why HP is doing this. One reason is price. This will be a relatively cheap device, substantially less than any of HP’s windows machines, and without it HP would have little to no presence in the consumer tablet market.

Why not a Windows RT or Windows 8 device? That is the heart of it, and more interesting than the slate itself. HP is not giving up on Windows tablets, but it is positioning them more as business machines whereas the new slate is a consumer device.

The problem is that Microsoft has so far failed to make Windows 8 viable for this kind of market. It is too expensive, too peculiar, and there are too few worthwhile apps. That, and the Windows Runtime platform is not yet good enough, as developers at the sharp end discover. This means that HP has little choice but to go Android.

The form factor is also a problem. 7” seems to be beyond Windows Phone 8 territory, but too small for Windows 8 or RT bearing in mind the desktop and Office aspect. It is an awkward gap in the Windows offering.

The impression I got from several vendors at the show is that Microsoft is on the right lines with Windows 8, but the first release is disappointing on the tablet side.

What if HP starts to experiment with Android tablets that can be used like laptops, with neat keyboard cases and office-style applications? In the end the market will decide on the balance between Android and Windows, with the signs currently that Microsoft will struggle to gain momentum in the consumer tablet market.

Notes from the field: USB 3.0 PCI Express cards, HP ML350 G6 and Server Core

If I search the web, get little help, and then solve a problem, I make a point of posting so that someone else will have a better experience. The challenge was this: finding a USB 3.0 PCI Express card that works in an HP ML350 G6 server, a popular choice for small business duties such as Small Business Server or Hyper-V Server. This particular example runs Hyper-V Server 2008 R2, based on Server Core, which can sometimes be awkward for installing drivers.

USB 3.0 is theoretically around 10 times faster than USB 2.0. If you are transferring large files or performing backup to an external drive, it can make a huge difference to performance.

Trawling the web was not particularly helpful. As this expert notes, there is no officially supported or recommended option for USB 3.0 on an ML350:

The ML350 G5 and G6 servers do not have, as a recommended option, a USB 3.0 and e-SATA controller, which would be clear to you by referring the quickspecs of the servers.

If you take the view that only recommended and certified components should be fitted to a server, give up and stop reading now. I do not disagree, but I tend to a pragmatic approach, depending on your budget and how system-critical is the server in question.

Further, it can work. This guy used a HighPoint 1144A card and it kind of works, though investigating I found that some users reporting that only two of the four ports actually work and you have to tolerate errors in device manager; it does not seem ideal. Another user noted that HP’s own card (which is designed for workstations and not the ML350) did not work though maybe it works for others, I am not sure.

I did find some references to success with a Renesas USB 3.0 chipset so found a StarTech card that uses this, PEXUSB3S2. Fitted it, but the server would not boot. A red LED on the server front panel indicated a “system critical” issue. Shame.

I tried a different card, bought in haste from Maplins. This one is a Transcend TS-PDU3. It also has a Renesas chipset. I fitted this to the PCIX 16 slot in the ML350. Note: if you do this, you will need some kind of extender cable for the power, since this (and most USB 3.0 cards) require additional power direct from the power supply. The ML350 G6, at least in my case, has plenty of spare Molex power connectors, but they are on short cables and sited at the front of the computer, whereas the PCI Express slots are at the back.

Good news: the server booted.

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Next up, drivers. No CD comes with this particular card, but you can download from the Transcend site. There are two drivers for different versions of the TS-PDU3. I used the second version (Molex and Sata power connectors). Fortunately the setup ran perfectly on Server Core; success.

I took the StarTech card and tried it in another PC, this one self-assembled with an Intel motherboard. This machine also runs Hyper-V Server, but the 2012 version. The machine booted properly, but the setup on the supplied CD did not run.

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“Sorry, the install wizard can’t find the proper component for the current platform”, it remarked cryptically.

I went along to the StarTech site and found an updated driver which looks remarkably similar to the one I had installed for the Transcend card. It ran perfectly and all is well.

This is a good moment to mention Devcon.exe, an essential tool if you are installing device drivers on Server Core. You can use the GUI Device Manager remotely, but it is read-only. Devcon.exe is part of the WDK (Windows Driver Kit), and it is not too hard to find. Make sure you use the right version (32-bit or 64-bit) for your system.

On server core, run:

Devcon status * –> devices.txt

to output the status of your devices to a text file. Open it in Notepad, which works on Server Core, and look for the word “problem” to see if there are issues. For example, Problem 28 is “no driver”. You also get the hardware ID from this output, needed if you use Devcon to install or update a driver. You may find things like audio devices that are not working; unlikely to be a worry on Server Core.

In my case, on both servers, I can see that the USB 3.0 card has been correctly detected and that the driver is running.

Why did the StarTech card not work on the ML350? Here I am going to shrug and say that PCI Express cards can be problematic. Equally, if I get good results and no unexpected behaviour from the Transcend card, I am not going to worry that it is a cheap card that does not belong in a server.

The truth is, if you need USB 3.0 you really need it, and the only alternative is a new server.

Will Windows 8 save the PC? Gartner reports 8% year on year sales decline

Gartner has reported on third quarter worldwide PC sales and they do not look good:

  • At 87.5 million units, they have declined 8.3% compared with the same quarter in 2011
  • HP is down 16.4%, Dell is down 13.7%. Lenovo managed 9.8% growth and is now number one with 15.7% of the market

Key quote: “The third quarter has historically been driven by back-to-school sales, but U.S. PC shipments did not increase, not even sequentially, from the second quarter of 2012. Channels were conservative in placing orders” said Gartner’s Mikako Kitagawa.

Gartner researchers add that ultrabooks have failed to turn round sales because they are not competitively priced. Worth noting when you look at the expensive hybrid docking tablets and convertibles vendors have come up with for Windows 8.

Gartner’s figures exclude “media tablets” such as the Apple iPad or Android tablets.

Of course you would expect a decline on the eve of the launch of Windows 8, as retailers clear their shelves, though Kitagawa says “On the professional side, there was minimum impact from Windows 8 in the quarter because the professional market will not adopt Windows 8 PCs immediately after the release.”

But will consumers rush to buy Windows 8 machines and make the next quarter boom? Let me throw out a few predictions:

  • Kitagawa is right about the professional market. We may see a few Windows 8 tablets show up among execs, but most companies will go the easy route and stick with Windows 7 for the time being.
  • The Windows 8 launch will be fascinating with cries of agony from some while others say it is rather good.
  • Time will be good for Windows 8 as the shock wears off and people learn how to use it.
  • Microsoft’s Surface will be a success and show Windows 8 at its best, though there will be confusion over lack of compatibility with desktop applications.

I am not sure though that this means a strong fourth quarter. Confusion over the new UI and vendors with over-complicated hybrid products will probably prevent sales from taking off immediately. Further, Windows 8 has to compete with Windows 7, which is already pretty good.

Broadly I reckon Microsoft is doing the right thing with Windows 8: reinventing the platform as a tablet OS while keeping faith with the past, on x86 at least.

I have doubts about some aspects of the Metro user interface and expect it will improve in later versions with some softening of the “immersive UI” religion that hides menus and toolbars so effectively that users think apps are broken, or have to click or tap twice when once should be enough – eg the back button in Metro-style Internet Explorer.

Even so, there are a few excellent new-style apps, more will come, and I expect the platform to succeed eventually.

ITWriting.com awards 2011: ten key happenings, from Nokia’s burning platform to HP’s nightmare year

2011 felt like a pivotal year in technology. What was pivoting? Well, users are pivoting away from networks and PCs and towards cloud and devices. The obvious loser is Microsoft, which owns PCs and networks but is a distant follower in devices and has mixed prospects in the cloud. Winners include Apple, Google, Amazon, and Android vendors. These trends have been obvious for some time, but in 2011 we saw dramatic evidence of their outcome. As 2011 draws to a close, here is my take on ten happenings, presented as the first ever ITWriting.com annual awards.

1. Most dramatic moment award: Nokia’s burning platform and alliance with Microsoft

In February Nokia’s Stephen Elop announced an alliance with Microsoft and commitment to Windows Phone 7. In October we saw the first results in terms of product: the launch of the Lumia smartphone. It is a lovely phone though with some launch imperfections like too short battery life. We also saw greatly improved marketing, following the dismal original Windows Phone 7 launch a year earlier. Enough? Early indications are not too good. Simply put, most users want iOS or Android, and the app ecosystem, which Elop stated as a primary reason for adoption Windows Phone, is not there yet. Both companies will need to make some smart moves in 2012 to fix these issues, if it is possible. But how much time does Nokia have?

2. Riskiest technology bet: Microsoft unveils Windows 8

In September 2011 Microsoft showed a preview of Windows 8 to developers at its BUILD conference in California. It represents a change of direction for the company, driven by competition from Apple and Android. On the plus side, the new runtime in Windows 8 is superb and this may prove to be the best mobile platform from a developer and technical perspective, though whether it can succeed in the market as a late entrant alongside iOS and Android is an open question. On the minus side, Windows 8 will not drive upgrades in the same way as Windows 7, since the company has chosen to invest mainly in creating a new platform. I expect much debate about the wisdom of this in 2012.

Incidentally, amidst all the debate about Windows 8 and Microsoft generally, it is worth noting that the other Windows 8, the server product, looks like being Microsoft’s best release for years.

3. Best cloud launch: Office 365

June 2011 saw the launch of Office 365, Microsoft’s hosted collaboration platform based on Exchange and SharePoint. It was not altogether new, since it is essentially an upgrade of the older BPOS suite. Microsoft is more obviously committed to this approach now though, and has built a product that has both the features and the price to appeal to a wide range of businesses, who want to move to the cloud but prefer the familiarity of Office and Exchange to the browser-based world of Google Apps. Bad news though for Microsoft partners who make lots of money nursing Small Business Server and the like.

4. Most interesting new cross-platform tool: Embarcadero Delphi for Windows, Mac and iOS

Developers, at least those who have still heard of Embarcadero’s rapid application development tool, were amazed by the new Delphi XE2 which lets you develop for Mac and Apple iOS as well as for Windows. This good news was tempered by the discovery that the tool was seemingly patched together in a bit of a hurry, and that most existing application would need extensive rewriting. Nevertheless, an interesting new entrant in the world of cross-platform mobile tools.

5. Biggest tech surprise: Adobe shifts away from its Flash Platform

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This one caught me by surprise. In November Adobe announced a shift in its business model away from Flash and away from enterprise development, in favour of HTML5, digital media and digital marketing. It also stated that Flash for mobile would no longer be developed once existing commitments were completed. The shift is not driven by poor financial results, but rather reflects the company’s belief that this will prove a better direction in the new world of cloud and device. Too soon and too sudden? Maybe 2012 will show the impact.

6. Intriguing new battle award: NVIDIA versus Intel as GPU computing catches on

In 2011 NVIDIA announced a number of wins in the supercomputing world as many of these huge machines adopted GPU Computing, and I picked up something of a war of words with Intel over the merits of what NVIDIA calls heterogeneous computing. Intel is right to be worried, in that NVIDIA is seeing a future based on its GPUs combined with ARM CPUs. NVIDIA should worry too though, not only as Intel readies its “Knight’s Corner” MIC (Many Integrated Core) chips, but also as ARM advances its own Mali GPU; there is also strong competition in mobile GPUs from Imagination, used by Apple and others. The GPU wars will be interesting to watch in 2012.

7. Things that got worse award: Spotify. Runners up: Twitter, Google search

Sometimes internet services come along that are so good within their niche that they can only get worse. Spotify is an example, a music player that for a while let you play almost anything almost instantly with its simple, intuitive player. It is still pretty good, but Spotify got worse in 2011, with limited plays on free account, more intrusive ads, and sign-up now requires a Facebook login. Twitter is another example, with URLS now transformed to t.co shortcuts whether you like it not and annoying promoted posts and recommended follows. Both services are desperately trying to build a viable business model on their popularity, so I have some sympathy. I have less sympathy for Google. I am not sure when it started making all its search results into Google links that record your click before redirecting you, but it is both annoying and slow, and I am having another go with Bing as a result.

8. Biggest threat to innovation: Crazy litigation from Lodsys, Microsoft, Apple

There has always been plenty of litigation in the IT world. Apple vs Microsoft regarding graphical user interfaces 1994; Sun vs Microsoft regarding Java in 1997; SCO vs IBM regarding UNIX in 2003; and countless others. However many of us thought that the biggest companies exercised restraint on the grounds that all have significant patent banks and trench warfare over patent breaches helps nobody but lawyers. But what if patent litigation is your business model? The name Lodsys sends a chill though any developer’s spine, since if you have an app that supports in-app purchases you may receive a letter from them, and your best option may be to settle though others disagree. Along with Lodsys and the like, 2011 also brought Microsoft vs several OEMs over Android, Apple vs Samsung over Android, and much more.

9. Most horrible year award: HP

If any company had an Annus Horribilis it was HP. It invested big in WebOS, acquired with Palm; launched the TouchPad in July 2011; announced in August that it was ceasing WebOS development and considering selling off its Personal Systems Group; and fired its CEO Leo Apotheker in September 2011.

10. Product that deserves better award: Microsoft LightSwitch

On reflection maybe this award should go to Silverlight; but it is all part of the same story. Visual Studio LightSwitch, released in July 2011, is a model-driven development tool that generates Silverlight applications. It is nearly brilliant, and does a great job of making it relatively easy to construct business database applications, locally or on Windows Azure, complete with cross-platform Mac and Windows clients, and without having to write much code. Several things are unfortunate though. First, usual version 1.0 problems like poor documentation and odd limitations. Second, it is Silverlight, when Microsoft has made it clear that its future focus is HTML 5. Third, it is Windows and (with limitations) Mac, at a time when something which addresses the growing interest in mobile devices would be a great deal more interesting. Typical Microsoft own-goal: Windows Phone 7 runs Silverlight, LightSwitch generates Silverlight, but no, your app will not run on Windows Phone 7.  Last year I observed that Microsoft’s track-record on modelling in Visual Studio is to embrace in one release and extinguish in the next. History repeats?

HP contributes webOS to open source. Where next for HP mobile devices?

HP has announced that webOS, the mobile operating system acquired with Palm, will become an open source project:

HP will make the underlying code of webOS available under an open source license. Developers, partners, HP engineers and other hardware manufacturers can deliver ongoing enhancements and new versions into the marketplace.

HP will engage the open source community to help define the charter of the open source project under a set of operating principles:

  • The goal of the project is to accelerate the open development of the webOS platform
  • HP will be an active participant and investor in the project
  • Good, transparent and inclusive governance to avoid fragmentation
  • Software will be provided as a pure open source project

Despite the upbeat language, the fact that HP does not state that it will actually manufacture any webOS devices suggests that this is more a retreat than an advance. What kind of investment will HP put into webOS, if it is not selling devices?

Another problem is that Google Android is doing a great job meeting the demand for a freely available and mostly open source mobile operating system, leaving little space for other projects such as webOS or the Intel-sponsored MeeGo.

The question that interest me: where will HP now go with its mobile devices? There are several possibilities. It could do nothing, and focus on servers and PCs, thereby missing out on what is potentially a huge market. It could throw its hand in with Microsoft, with Windows 8 tablets sometime next year, and maybe some future version of Windows Phone. Or it could embrace Android, which still seems to have unstoppable momentum despite poor sales for most Android tablets.

Sanity prevails at HP which is keeping its PC division

HP has announced that HP is keeping its Personal Systems Group, its PC division.

“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees,” said Meg Whitman, HP president and chief executive officer. “HP is committed to PSG, and together we are stronger.”

The strategic review involved subject matter experts from across the businesses and functions. The data-driven evaluation revealed the depth of the integration that has occurred across key operations such as supply chain, IT and procurement. It also detailed the significant extent to which PSG contributes to HP’s solutions portfolio and overall brand value. Finally, it also showed that the cost to recreate these in a standalone company outweighed any benefits of separation.

I am not surprised – it took me and many other observers about two minutes to reach the same conclusion back in August, when HP announced that it was considering a “spin-off or other transaction” for PSG.

I find it remarkable that HP did not conduct this research before, rather than after, announcing its uncertainty to the world. These last couple of months must have been challenging for the PSG sales and marketing team and costly for HP.

Nevertheless, good news for HP and its customers, and for Microsoft for whom HP is perhaps its most important hardware partner.

HP business breakdown and why a PC spin-off could backfire

I had a look at HP’s latest financials, following last night’s triple blast of news from the computer giant. It is ceasing webOS operations, acquiring enterprise knowledge management company Autonomy, and considering (though only considering) a spin-off or other major change to its PC division, the Personal Systems Group. Here is what HP said:

As part of the transformation, HP announced that its board of directors has authorized the exploration of strategic alternatives for the company’s Personal Systems Group. HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction. (See accompanying press release.)

Looking at the results for the second quarter 2011, here is how the main pieces break down:

$millions

Segment Percentage of revenue Earnings Percentage of total earnings
Services 9,089 28.5% 1225 33.8%
Servers, storage and networking 5396 16.9% 699 19.3%
HP Software 780 2.4% 151 4.2%
Personal systems group 9,592 30.1% 567 15.7%
Imaging and printing 6,087 19.1% 892 24.6%
Financial Services 932 2.9% 88 2.4%

Note that “Earnings” is earnings from operations; HP actually made less money than that, because various other corporate costs have to be deducted. But it gives an idea of where HP’s profit comes from.

So what do these groups do? PSG is notebooks, desktops, workstations and other, where “other” I’d guess will include the webOS mobile devices. In PSG, notebooks accounts for 54% of the total, with desktops taking 38% of the rest. Virtually all of these run Windows.

In servers, storage and networking, 61% is from what HP calls “Industry standard servers”. This is code for Windows server.

Under services, the three big businesses are Infrastructure Technology Outsourcing (42%), Technology Services (30%) and Application Services (19%). The first of these is clear-cut (have HP run your infrastructure), but the second two are both consulting services and on a brief look seem to have some overlap.

Autonomy, by the way, reported revenue of $million 247 in the three months ending June 30 2011 – pretty tiny relative to HP.

A few comments then. It’s worth noting that PSG is the biggest single segment for revenue, but not so for profit, though it is still making a useful contribution.

Imaging and Printing contributes most earnings as a proportion of revenue. I do not know how much of that comes from absurdly overpriced ink cartridges!

If you take PSG together with Industry Standard Servers, you find that around 40% of HP’s revenue comes from boxes running Windows. If you then consider what its printers, network and storage systems attach to, and that a proportion of HP’s consulting business concerns Windows systems and applications, it is obvious that HP’s fortunes are deeply entwined with Microsoft.

If HP removes PSG that will still be true, though less so. But why would HP want do remove PSG? I would guess two main reasons. One is that it is unprofitable relative to the other segments, and the other is that HP foresees the business declining under the force of various well-documented pressures: Apple, mobile, cloud.

It still makes little sense to me. I can understand why HP might want to get out of consumer desktops and laptops, but it seems to me that to supply corporate PCs fits snugly with the rest of HP’s business and has beneficial side-effects. After all, PCs, printers and servers do all plug together both physically and conceptually. Getting rid of PSG might have a negative effect on other parts of HPs business.

In the SMB market, by the way, resellers like HP because unlike Dell it does not mainly sell direct. HP boxes generally work as advertised in my experience, though I rate the laptops less highly than the servers and desktops.

HP discontinues WebOS, considers PC spin-off. Should have stuck with Microsoft

Oh yes, and buys Autonomy, a fast-growing specialist in enterprise knowledge management.

Here’s the news from HP’s announcement:

As part of the transformation, HP announced that its board of directors has authorized the exploration of strategic alternatives for the company’s Personal Systems Group. HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction. (See accompanying press release.)

HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The devices have not met internal milestones and financial targets. HP will continue to explore options to optimize the value of webOS software going forward.

In addition, HP announced the terms of a recommended transaction for all of the outstanding shares of Autonomy Corporation plc for £25.50 ($42.11) per share in cash.

A few quick comments. First, the failure of webOS does not surprise me. There is not much wrong with webOS as such; in pure technical terms it deserves better. Its focus on adapting web technologies for local mobile applications is far-sighted; it is a more interesting operating system than Android and in some ways it is surprising that it went to HP and not to Google, which is a web technology specialist.

The problem is that HP, despite its size, is not big enough to make a success of webOS on its own. This was my comment from just over a year ago:

Mobile platforms stand (or fall) on several pillars: hardware, software, mobile operator partners, and apps. Apple is powering ahead with all of these. Google Android is as well, and has become the obvious choice for vendors (other than HP) who want to ride the wave of a successful platform. Windows Phone 7 faces obvious challenges, but at least in theory Microsoft can make it work though integration with Windows and by offering developers a familiar set of tools, as I’ve noted here.

It is obvious that not all these platforms can succeed. If we accept that Apple and Android will occupy the top two rungs of the ladder when it comes to attracting app developers, that means HP webOS cannot do better than third; and I’d speculate that it will be some way lower down than that.

Frankly, if HP did not want to do Android, it should have stuck with Microsoft. But this is where the webOS news ties in with the announcement about he Personal Systems Group. HP fell out with Microsoft last year, as I noted in my 2010 retrospective. I said the two companies should make up; but it looks as if HP is more inclined to give up on PCs and pursue other lines that have better margins – like enterprise software.

I am puzzled though by the PSG announcement. It is always curious when a company announces that it might or might not do something, and the fact that HP says it is considering a spin-off of its PC division will be enough to makes its customers uncertain about the long-term future of HP PCs and some of them will buy elsewhere as a result. It would have paid HP either to say nothing, or to be more definite and aim for a speedy transition.

All this, on the eve of Microsoft’s detailed unveiling of Windows 8. What are the implications? More than I can put into a single post; but like Gartner’s reports of dramatically declining PC sales in Western Europe presented earlier this week, this is a sign of structural change in the industry.

Microsoft will be glad of one thing: it no longer has this major partner promoting a rival mobile and tablet operating system. Note that HP still is a major partner: even if it sells the Personal Systems Group, its server and services business will still be deeply entwined with Windows.