Poor results from its storage and enterprise servers business cast a shadow over otherwise healthy financial results for Hewlett-Packard (HP) in the past quarter, with resellers and analysts blaming heavy price discounts and the struggle to migrate from selling hardware to services.
"Solid results in personal systems, imaging and printing, software and services were overshadowed by unacceptable execution in enterprise servers and storage," said Carly Fiorina, HP's chief executive.
Fiorina highlighted problems with channel management in Europe, "including channel compensation, overly aggressive discounting and the transition to a centralised claims process".
HP enterprise servers and storage reported turnover of $3.4bn, down by five per cent year on year. Total storage turnover totalled $709m for the quarter, down by 15 per cent year on year.
Online storage, including EVA and XP enterprise storage, fell by 23 per cent year on year, and nearline storage, which includes the tape library business, declined by 16 per cent.
Claus Egge, analyst at IDC, said: "Firms are buying storage capacity but are paying less for it. Price erosion and commoditisation of expensive disk products has happened more quickly than we thought," he said.
Donal Madden, business manager for HP enterprise products at distributor Ideal, said HP is dropping its prices dramatically to compete with EMC and IBM.
"HP is not losing sales, but it is having to discount significantly and is being more aggressive [on price] than before," he said.
Madden added that resellers are struggling to cope with the transition from being hardware suppliers to service suppliers. "How do they focus a salesforce used to selling hardware into selling more services? It is an impossible tightrope to walk," he said.
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