Hewlett Packard (HP) has backed Microsoft's claims that the PC industry is not dead, insisting that it achieve its annual growth targets.
A row erupted following Lou Gerstner, chief executive of IBM, claimed that the 'PC era is over' (PC Dealer, 31 March). Last week Steve Ballmer, president of Microsoft, maintained that the software vendor was not seeing any evidence of a slowdown in growth in the PC market.
Lew Platt, chairman and chief executive of HP, claimed last week that the company's PC business was 'growing, healthy and profitable'. Whatever problems competitors were experiencing, Platt said HP was hitting its targets for PC sales and did not foresee problems in the market.
IBM's recent announcement of a near $1 billion loss in its PC business and Compaq's recent profit warning said more about those companies than the market as a whole, Platt claimed.
'Is the PC era over? It may be for IBM,' he said. 'I don't think so. Quite solid growth is capable from leading vendors.
'I heard Gerstner talking about the end of the PC age, but I just don't agree. It may come from his perspective of how IBM is doing in the business ... it is struggling. Frankly, we are doing quite well, meeting our growth plans,' he added.
Platt said the vendor was only two thirds through the second quarter and he was already confident that revenue growth would be above the two per cent experienced in the first quarter, which he described as 'very low'.
He said he still expected the manufacturer to hit its target for double-digit growth for the year overall, with a strong second-half performance. This would come from all divisions, including PCs.
'No projection we have made shows that the PC market is about to shrink and go away,' he said, 'Growth could shrink slowly over the next few years and could get to a point of negative growth - especially with internet appliances (becoming important) in the market - but not yet.'
In a separate move, HP also formally announced details of its mid-range server product, the N class. The company is hoping that the N class server - previously codenamed Prelude - will help it win back some of the ground lost over the past year to Unix arch-rival Sun Microsystems. The server will run up to eight PA Risc 440MHz processors and cost between $50,000 and $200,000.
The N class requires users to buy a complete server if they wish to upgrade from its predecessor, the K class. This is because the server is a completely different design, with improved architecture and system bus that include the capability of a simple slot-in upgrade to Intel's IA-64 processors, according to HP.
HP believes this compatibility will be a key selling point to customers - and it will need to be if it is to recoup the sales lost during the transition period to the new server. Customers have been holding off buying the K class in anticipation of the arrival of the N class.
Bill Russell, vice president of HP's enterprise systems group, believes customers are still keen to get hold of the product when it ships on 17 May.
'I am already very happy with the order book for the N class and it has only been on the price lists for a month,' he said, although he admitted that HP should have brought the N class product to market a year earlier.
He pointed out that the N class is rack mountable, while the K range was not. This is vital requirement for selling into the ISP and telco markets, which require large numbers of servers with high performance but minimal footprint.
Part of the reason the N class is important to HP is that the mid-range product area generates between 60 and 70 per cent of HP's Unix hardware revenue. Furthermore, server revenue growth has slumped badly over the past year, particularly due to Sun's aggressive attack on HP's Unix market share.
Between Sun stealing sales and the N class product transition, analysts at finance house Merrill Lynch estimate the second quarter of this year will continue to be bad for HP, with a 15 per cent drop in revenue for the enterprise systems group.
The company already suffered a disastrous decimation of Unix server revenue in the fourth quarter of 1998, when manufacturing problems with its K class range meant it failed to ship a single server in December.
Last month, HP jumped on the internet bandwagon when it launched Electronic Solutions (ESN). It is aimed at the company's top 1,000 to 1,500 customers to enable them to view product information and buy products and services from HP and some of its partners (PC Dealer, 17 March).
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