Dell, HP Both Have Disappointing Quarters

Both Dell Computer Corp. and Hewlett-Packard Co. had bad days Thursday: Dell fell short of fiscal fourth-quarter estimates by a penny and lowered projections for its first quarter, while HP did meet expectations -- the problem is, they were lowered expectations.

On the positive side for Dell, however, were surging server sales. The outlook for HP’s server business continues to be gloomy.

Dell’s earnings were $508 million, or 18 cents per share, on $8.7 billion in revenue for the quarter. Earnings for the same period last year were $436 million, or 16 cents per share.

Dell also lowered expectations for the first quarter, projecting $8 billion in revenues. Dell recently announced the first major spate of layoffs in its history to cope with the downturn in PC sales.

At least Dell saw an earnings increase over last year. HP, on the other hand, saw its fiscal first quarter earnings drop 12 percent from the previous year, to $727 million, or 37 cents per share. That compares with $825 million in earnings, or 40 cents per share, for the same period in 2000.

HP had revenue of $11.9 billion for the quarter, a 2 percent increase over revenues of $11.7 billion from the same quarter last year.

HP chief executive Carly Fiorina blamed the slumping figures on the slowing U.S. economy and cooling of the PC market. But she cannot blame the economy for the poor sales of its servers, a segment of the market that, in contrast to the rest of the industry, has been growing steadily.

HP revenues from commercial PCs and Intel-based servers were down 11 percent, while Unix sales to Internet companies have disappeared. Sales of HP’s ultra high-end “Superdome” Unix server have been very disappointing, according to Fiorina. "We are not yet realizing significant revenues. The sales cycle is turning out to be longer than expected" for Superdome, Fiorina said.

The story is different for Dell, which has been aggressively pushing its server line. Fourth quarter revenue for rack-mount servers accounted for about 40 percent of all server revenue, a jump of 230 percent from the previous year, while eight-way server sales grew 73 percent.

Dell’s better performance in server sales may in large measure be due to its earlier presence in the rack-optimized 1U space, currently the fastest growing segment of the server market. Dell first started shipping 1U (1.75” high) servers, known as its PowerApp line, last May. HP didn’t announce its first 1U offering, the Netserver, until January of this year. -- Keith Ward

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.