Will the Real HP Please Stand Up?

Some Questions About What Drives the Computer and Communications Industry Association (CCIA)

Joe Clabby — Tue, 13 Oct 2009 18:08:00 GMT

In a recent complaint filed with the U.S. Department of Justice (DOJ), an industry watchdog organization (that I had never heard of) known as the CCIA has asked the government to look into alleged anti-trust behavior in the mainframe market segment. The core of the CCIA's argument is that IBM’s refusal to let other vendors market its z/OS operating environment on the hardware of their choice constitutes monopolistic behavior. The CCIA seems to believe that if IBM would let other vendors market its z/OS operating environment on non-mainframe hardware, then consumers would benefit by being able to purchase IBM z/OS on less expensive (and less reliable and secure) server platforms.

Like the CCIA, I'd like to see mainframe prices continue to be reduced. But, unlike the CCIA, I'd rather see price change driven by market ebb and flow, rather than through strong-arm legal challenges by suspect industry watchdog organizations. In fact, mainframe pricing is already changing, in response to a highly competitive market factors. IBM has reduced prices for its mainframes between 50-90% this decade (depending on the configuration). And IBM recently introduced new "Solution Editions" for System z -- packaged hardware and software bundles (such as SAP on Linux on System z) also designed to reduce the purchase price of mainframes. The fact is that IBM has repriced its mainframes in order to compete more effectively with high-end Unix servers that are encroaching on mainframe territory (this is an example of what I mean by natural ebb and flow). And as a result of this repricing, mainframes and Unix servers are closer than ever in terms of total cost of acquisition price.

So, if mainframe repricing is already underway and if other competing systems are now positioned to challenge mainframes (so IT buyers have alternate platforms from which to choose), what is the motivation for the CCIA's complaint to the DOJ? Here are a few thoughts:

1. The CCIA sees itself as a promoter of open markets, open systems, open networks, and full, fair, and open competition. Perhaps the CCIA considers IBM's reluctance to share its operating system (that, I note, represents billions of dollars of IBM investment in intellectual property, which IBM has a right to protect) with its member organizations as a refusal to participate in what the CCIA considers open markets. At the same time, the CCIA fails to recognize that IBM has made its mainframes open systems that run Java and Linux, for example, in response to a competitive marketplace.

2. Perhaps the CCIA member organizations are pushing CCIA leadership to initiate these anti-trust proceedings. I note that TurboHercules, T3 Technologies, Microsoft, and Oracle (all CCIA members) can all directly benefit by forcing IBM to capitulate by handing its operating environment over to third parties. TurboHercules is an open source mainframe effort that would benefit if it could deploy z/OS on other hardware platforms and take advantage of the billions of dollars IBM has invested into its mainframes and no cost to them. T3 Technologies has already challenged IBM for rights to use z/OS and lost in a New York district court. At this week's Oracle World, Larry Ellison has made it clear that Oracle intends to compete aggressively in the server marketplace and targeted IBM systems and advertisements in his presentation. And Microsoft runs a mainframe migration program. I'm hoping that the DOJ looks closely at the motivation of these vendors as it considers taking any action in this case.

3. Perhaps the CCIA has a different motive and sees an opportunity to benefit financially from these proceedings. According to an InfoWorld article in 2004, Microsoft settled an anti-competition case with the CCIA and Novell (this case was being held before the European Commission) and a major chunk of that settlement went to a CCIA executive. Of the $19.75 million settlement, it is alleged that the CCIA executive received almost half (as well as a $500,000 salary "bonus" for three years). This article can be found at: http://www.infoworld.com/t/platforms/update-microsoft-paid-ccia-official-reports-says-711. With this kind of reward system for issuing complaints and then settling out-of-court, the CCIA and its executive could hit the jackpot with its latest complaint/accusation.

The bottom line in this discussion is that pricing activities to drive down mainframe costs are already under way and that raises the question: What is the CCIA's real motivation for issuing its complaint? I suggested three reasons, but I'd like to hear your opinion on what you think is happening here.

Mainframe Monopoly

Joe Clabby — Mon, 12 Oct 2009 19:07:00 GMT

Last week, an obscure organization known as the CCIA (Computer and Communications Industry Association) that claims to promote “full, fair, and open competition” in the computer marketplace filed an antitrust complaint with the U.S. Department of Justice regarding IBM’s mainframe business practices. In its complaint, the CCIA alleges that IBM has refused to issue licenses for its z/OS operating system to competitors — a practice that the CCIA apparently finds unfair and monopolistic. The Department of Justice has, accordingly, issued formal requests for information from IBM as it investigates IBM’s activity in the mainframe marketplace.

The CCIA has based its complaint, in part, on licensing and business practices that pertain to IBM dealings with Platform Solutions Inc. (PSI) and T3 — vendors that wished to sell IBM’s z/OS operating environment on Intel-based servers. In these cases IBM declined to allow PSI and T3 to sell or transfer z/OS on Intel Itanium-based platforms. IBM ended up buying PSI; and T3’s complaint was dismissed by the U.S. District Court in its entirety.

Still, the CCIA complaint does, however, raise a number of interesting questions with respect to IBM’s behavior in the mainframe marketplace:

1. Can it be successfully argued that IBM has a mainframe monopoly?
2. Can it be successfully argued that customers are locked-into mainframes?
3. Should IBM be compelled to provide key intellectual property to whichever vendor wants to use it? And,
4. Does the refusal to allow IBM intellectual property (z/OS) to be sold on other platforms really constitute anti-trust (monopolistic) behavior?

The remainder of this blog examines these questions.

Does IBM Have a Mainframe Monopoly?
There are two ways to look at this question:

First, IBM owns greater than 90% of the mainframe marketplace. Hence, one can argue that, as the dominant leader in this market segment by such an overwhelming margin, IBM has a monopolistic position. (Wikipedia defines a monopoly as a situation that exists “when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it”).
But, on the other hand, a mainframe is a server — and just because IBM dominates in one segment of the server market doesn’t mean that IBM has a server monopoly. In fact, mainframes represent only .03% of the server market. So, does a .03% market share really constitute a monopoly?

After considering both points, Clabby Analytics would concur with the opinion that IBM has a monopolistic position in the mainframe marketplace. But does having a controlling, monopolistic position automatically translate into anti-trust behavior. We would argue “No”.

The Real Issue: Running z/OS on Other Platforms
What the CCIA is really complaining about is IBM’s refusal to allow competitors to use its intellectual material against itself (in this case, IBM’s z/OS on other hardware versus z/OS on mainframe hardware). And because IBM is not letting other competitors use z/OS, the CCIA apparently believes that IBM is guilty of an anti-trust activity by creating vendor lock-in. And this alleged lock-in contributes to high mainframe hardware prices (a situation that the CCIA considers an anti-trust behavior).

For the DOJ to make an anti-trust case, the DOJ will need to prove that mainframe customers are truly locked in? Clabby Analytics would argue the opposite:

First, IBM mainframe customers have other alternatives. Unix-based RISC and EPIC servers can be configured to challenge mainframes in terms of processing capacity. And monster PC clusters can be created that can also provide mainframe-equivalent computing capacity.
Second, mainframes are “open systems” (mainframes can run Linux, Java, service-oriented architecture [SOA] and opens source applications). So, if customers want to run their applications on other hardware, there is nothing to stop them from deploying their applications on distributed servers. In fact, they can minimize the role of the mainframe in their organizations and surround the mainframe with distributed servers if they so desire. Or they can migrate off of a mainframe if so desired.

If customers can move to other platforms, then they have a “choice” of which platform they can use. And if a customer has choice, then a lock-in situation does not exist.

As noted above, IBM customers can use other hardware configurations to build information systems environments that have the equivalent processing power of a mainframe. So, if hardware isn’t responsible for creating lock-in — then that leaves the operating environment as the prospective lock-in entity.

Operating systems are control programs that enable applications and databases to make use of underlying computer resources (disk, printers, etc.). And IBM’s z/OS is the most advanced operating environment in the world — the “gold standard” when it comes to virtualization and provisioning; the world leader in security (EAL) level 5; superior service management solutions; and more. IBM has spent decades building and perfecting this operating environment — and has a right to recoup its ongoing investment in the z/OS operating environment.

From our perspective, compelling IBM to allow other vendors to use its own operating system against it raises the following concerns:

1. Is it right for the legal system to dictate which markets IBM can compete in and how it competes in them?
2. Is it right for the legal system to force a company to use its own intellectual property against itself and to undermine its own strategies?

If the DOJ decides to pursue CCIA’s complaint, I will discuss these two questions in greater depth in subsequent blogs.

Summary Observations
Ultimately, the big question on the table is whether other vendors should have a right to deploy z/OS on other platforms. If allowed to do so, competing vendors could undermine IBM’s mainframe pricing structure by delivering lower cost alternatives to mainframe hardware. And, to us, that would be really unfair.

The CCIA’s complaint is aimed at driving down mainframe hardware pricing. But this is already happening — driven by natural market pressures. Pressure from Unix servers that are moving up into traditional mainframe markets are forcing IBM to become more competitive in the mainframe pricing arena. As an example, IBM has recently announced “Solution Edition pricing (see a in depth description of this pricing at www.gomainframe.com), mainframe solutions that bring System z prices down by 50-80% for particular applications (like SAP). Solution edition pricing takes direct aim at reducing the cost of mainframes by bundling hardware and software together and selling “solutions” at reduced cost. So, it can be argued that IBM is already taking action to reduce its mainframe price structure — which is the whole reason for the CCIA’s complaint. This solution set argument should also serve to show the DOJ that the market can take corrective actions by itself — without government intervention.

Also note that, in interviews with IBM mainframe users (and we talk to a lot of mainframe users), Clabby Analytics has identified three challenges that IBM faces in the mainframe marketplace: 1) price; 2) old technology; and 3) skill sets. With respect to pricing, almost every mainframe customer will agree that mainframes are expensive. But these customers also tell Clabby Analytics that their investments in mainframes are well worth it for the peace-of-mind that mainframes deliver. These customers understand that mainframes offer the strongest RAS (reliability, availability, and security), the best virtualization, and the best management facilities in the industry. So, although mainframes are costly, numerous mainframe customers have told Clabby Analytics that the investment is well worth it.

Finally, if customers see and understand that you get what you pay for when you buy a mainframe — and if IBM is already taking corrective actions to lower mainframe prices — then who is the CCIA really advocating for? Perhaps this should be the topic of another blog…

History Be Damned: Oracle Will Make SPARC Successful Again!

Joe Clabby — Fri, 11 Sep 2009 13:09:00 GMT

In a clearly expensive advertisement in the Wall Street Journal on September 10th, 2009, Oracle, in what appears to be a desperate move to protect their valuation after the close of the Sun acquisition, has yet again shocked the analyst community by making it clear that Oracle intends to stay in the SPARC hardware business. Most of us analysts thought that the comparatively low margins in hardware (margins as low as the single digits or teens) would discourage Oracle from moving into the hardware business (Oracle is used to greater than 40% margins on its software products). And some of us noted that moving into systems hardware could alienate some of Oracle’s strongest systems integrator partners (particularly Dell ─ a company that has a strong strategic business relationship where Dell provides the hardware, Red Hat provides Linux, and Oracle provides the middleware/database/management environment). But Oracle has made it clear that it intends to persist in its dream to become a hardware company…

In its advertisement, Oracle announced that it will:

Spend more money developing SPARC than Sun does now;
Spend more money developing Solaris than Sun does now:
Have more than twice as many hardware specialists selling and servicing SPARC/Solaris than Sun does now; and,
Dramatically improve Sun’s hardware performance by tightly integrating Oracle software with Sun hardware.

A number of questions arise from Oracle's assertions:

How much money is Oracle talking about spending? Spending more money than Sun is spending is "a little vague..."
How many hardware specialists are we talking about (remember, Sun has been through several layoffs over the past few years -- how many hardware specialsts were left?).
If Oracle is talking huge investment in Sun hardware and its operating environment, how will it meet its stated accretive financial targets while making this investment? And,
"Will throwing more money at SPARC hardware and software fix certain endemic problems related to Sun design and release capabilities?”

Some Answers
Here are some of our perspectives on Oracle's assertions:

On spending more than Sun -- this information is proprietary so only Oracle and Sun really know how much was being spent. But if the number was low (as we suspect it was), then spending a little more than a low figure is not very impressive.
On the number of hardware specialists -- again, if the number of current hardware specialists is low (as we suspect it is due to layoffs and given Sun's policy of letting its business partners handle a lot of support and professional services), then again, we're unimpressed.
On the finanacial investment that Oracle needs to make -- what if Oracle needs to spend at least a billion dollars to make the Sun SPARC line competitive with other architectures. If that's the case, how will Oracle meet its accretive financial commitment? (From Oracle's own press release: "We expect this acquisition to be accretive to Oracle's earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle's non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. ) If you've got to spend a billion or more to make SPARC more competitive, there goes the Sun contribution to Oracle's non-GAAP operating profit.
On investing more money into Sun hardware without solving habitual slipped schedules and endemic design problems -- that may be throwing good money after bad.

A Historical Perspective
Point #4 is worth dwelling on a bit more. <:od>Wikipedia, the Internet encyclopedia, accurately describes Sun’s progress from its inception to its take-over. But what the Wikipedia article does not describe in much detail is why Sun was so successful up until the bubble burst ─ and why Sun has had such a hard time getting back on track afterwards.

The following is Clabby Analytic’s view of Sun’s current predicament:

As a Unix workstation company, Sun’s natural progression was into the low-end of the Unix server market space. And, because it started at the low-end, Sun found itself in the perfect position when business use of the Internet took off ─ and the need for Unix-based Web (Apache) servers mushroomed. Other vendors (HP and IBM) were building high-end Unix servers ─ big servers ─ at a time when Sun’s server product line was comprised mostly of small servers. Sun had no real low-end competition ─ and, accordingly, made huge inroads into the server market. This “fortunate happenstance” of product positioning enabled Sun to become the Unix server volume leader. (Note: post 2001, Sun’s competitors had introduced their own low-end Unix servers, making it even more difficult for Sun to recover from the downturn).
In the mid-1990s, Sun decided to expand into the high-end of the Unix market. Using its own developmental resources, Sun internal developers had architected their own high-end enterprise servers when, in 1995, another “very fortunate happenstance” occurred. One of Sun’s business partners, Cray Business Systems had architected a powerful, high-end Sun Unix server (that featured a high-speed switching architecture that enabled Sun servers to scale extremely efficiently). Cray was sold-off to Silicon Graphics, Inc. (SGI) which immediately turned around and sold this Cray Business Systems high-end UltraSPARC environment to Sun (for a paltry sum of only $50 million!). And shortly thereafter, Sun’s internal designs were jettisoned in favor of the Cray design. Not long after that, Sun’s very successful ES10000 was born. (The purchase of Cray’s design can be classified as one of the best technology deals of the 1990s).

But this is where the beginning of the end occurred:

Although Sun low-end, midrange, and high-end enterprise servers became highly successful, Sun was not able to parlay its initial successes into continued success. After the bubble burst, there was no white knight in the form of Cray Business Systems that came along with a new technology that could help Sun leapfrog its competitors. And there was no “fortunate happenstance” that put Sun in an advantageous position after the bubble burst in 2001. In order to recover from the economic downturn of 2000 and leap frog its competitors, Sun was going to have to prove that it could develop its own game-changing architecture. And Sun didn’t.
Sun’s internal attempt to design and build its next game-changing architecture that could deal with multi-cores and multiple threads (codename “Honeybee”) met with failure as the company turned to Afara Websystems for its next generation microprocessor design (these became Sun T1 and T2 servers).

Constant slippage of successive generations of UltraSPARC processors, combined with delays in the development and implementation of its new chip multi-threading (CMT)-based processors left Sun customers waiting for long, extended periods for product refreshes. By the time Sun’s T1 and T2 architectures came along, there was huge, built-up customer demand for more scalability, computing power, and capacity ─ so quite a few T1/T2 servers were sold initially. Meanwhile, other Sun customers, who had been burned by constant delays in product refreshes, started to look elsewhere for alternative Unix servers that could deliver the computing power and scalability that they needed on a more timely basis.

Parting Comments
It is clear to Clabby Analytics that customer confidence in Sun is waning (big time). Oracle will attempt to revive that confidence -- but it may be too late.

At this juncture, Clabby Analytics sees Sun SPARC archtiecture as irrelevant. In fact, we now see the midrange/high-end of the server market moving strongly toward three microprocessor architectures:

1) mainframe processors;
2) POWER; and
3) Intel Xeon (8-cores and beyond).

Is throwing money at UltraSPARC and CMT technologies really going to fix Sun’s endemic microprocessor technology problems? It hasn’t to date — so we have little confidence that increasing the spend on Sun microprocessors is really going to help Oracle extricate Sun servers from their current malaise.

Will the Real HP Please Stand Up?

Joe Clabby — Mon, 02 Mar 2009 10:58:00 GMT

Will the Real Hewlett-Packard Please Stand up?

Clabby Analytics, my research firm, creates:

Advisory reports (for instance, what to consider when buying blade technologies);
Opinion/counter opinion reports (for instance, I have often challenged the wisdom of buying Itanium-based servers); and,
Case studies (I go on site and talk to real IT executives and users – and report my findings).

When reading my reports and opinions, I strongly encourage my readers to see out counter opinions – and then balance what I say to the opinions of other respected IT research industry analysts. I believe that by weighing what I say, and what others say, IT executives can reach their own opinions on where truth can be found.

In this opinion, I express my reasons for taking such a dim view of Hewlett-Packard (HP) over the past several years. These reasons fit into three categories:

HP’s positioning in the IT industry as a "technology leader" ;
HP’s product offerings; and,
HP product deficiencies.

I consider all of these topics in the following sections.

Is HP Really a Leader in IT for the Business Marketplace?

Some research analysts may argue that HP is a market leader when it comes to building systems and software – and in providing services – to the information technology (IT) industry. (My favorite quote is from Hoover’s Online which says "HP wants to be ‘it’ when it comes to IT"). In fact, HP fosters this image with statements such as "no other company offers as complete a technology product portfolio as HP. We provide infrastructure and business offerings that span from handheld devices to some of the world's most powerful supercomputer installations".

I have two issues with this HP statement. First, I strongly believe that HP does not have a "complete" technology product portfolio (for instance, it is missing critical middleware technologies – and the company does not build its own high-end storage). Second – I consider HP’s supercomputing strategy and product set to be broken (so why HP is highlighting its involvement in supercomputers is a mystery to me).

Allow me to elaborate on both points…

HP Does Not Supply a Complete Infrastructure Stack

Back in 2002, I reported:

On September 15th, 2002, HP announced its 'HP Discontinuance Plan' relevant to HP middleware product offerings. The company announced the discontinuance of HP Application Server (HP-AS), HP Application Server Resilient Edition, HP Web Services Platform, HP Core Services Framework, HP Total-e-Server, HP Process Manager and the Changengine family of products.

The crux of this announcement is as follows:

· HP essentially killed-off HP proprietary middleware development (finally!);
· The company announced plans to work more closely with software partners (like BEA - partners who build middleware products). Especially noteworthy is that HP's focus partners build Java-based infrastructure solutions. Java (more specifically J2EE) solutions provide the primary competition for HP's newly announced .NET initiative).
· The company announced that it will continue to focus on extending its OpenView systems/network management technologies and HP Utility Data Center to produce a comprehensive management fabric for optimizing infrastructure assets.

What this means is that in 2002, HP exited the infrastructure middleware business. And yet the company claims that no other company offers as complete a technology portfolio as it does. I note that IBM and Sun both have extensive infrastructure stacks and middleware products – so clearly HP’s claim is in error.

For those not familiar with the words "infrastructure stack", allow me to explain. When building information systems, systems designers/builders choose hardware, an operating environment, a middleware environment, a management environment, and applications and databases. Each of these environments build on the other – hence they are referred to as a "stack". Middleware is a key component of any stack – its how programs can talk to other programs and how data can be share with disparate data. And failure to own this important element of a stack puts HP at the development whim of its middleware suppliers.

Having worked for a hardware maker earlier in my career, I know that aligning partner strategies and priorities is difficult. (In fact, we had to pay our business partners to port their products to our product line, to implement the changes that we wanted, and to offer support for our products). By taking itself completely out of the middleware business, HP has lost the ability to control its own infrastructure destiny, both up-and-down its product stack. This has, in turn, relegated HP to the role of being a systems integrator that needs to wait for its partners to deliver the functionality it may want in the timeframe the partner wants to deliver it. HP is at the whim of its partners for pricing, for development priorities, and for initiative funding.

Further, I note that hardware makers who own their own infrastructure can tweak that infrastructure to take advantage of advanced hardware functions (instead of building for generic system images) - and these hardware makers can also manage developmental priorities more effectively. And, given that HP is no longer in the middleware business, I see HP as "not in control" of its developmental direction (as, for instance, Sun and IBM are).

Back to the genesis of this subsection: HP claims no other company offers as complete a technology product portfolio as HP. I beg to differ. Several companies offer more complete portfolios of infrastructure and business process offerings.

Supercomputing and the Broken Scale-up Server Cycle

I consider HP’s server strategy and product line to be broken in two places: 1) the use of Itanium-based processors; and, 2) the failure of Itanium-based servers in the supercomputing space. Allow me to explain…

The Itanium Disappointment

Back in the early 1990s, HP systems engineers got the bright idea that they could build a processor technology that would blow-away the market’s advanced RISC processors. Accordingly, HP (as well as Intel and some other partners) embarked on a plan to build a processor environment that could compile instructions in software, and then hand off those instructions to a processor designed specifically to rapidly execute those instructions. (Competitor RISC processors compile and execute on the chip - HP’s/Intel’s Itanium EPIC [explicitly parallel instruction computing] processors would only have to perform execution work). This was a great idea - but badly executed:

Itanium was at least five years late (I could argue even ten years late) to market; and,
This processor did not meet market expectations in terms of performance (so today, for instance, IBM’s POWER-based RISC processor significantly outperforms HP with its Itanium-based processors in dozens of industry standard benchmark tests).

To add insult to injury, HP decided that it would be a great idea to obsolete all of its RISC processor lines - and to base all of its server lines on this single, 64-bit, EPIC architecture. Accordingly, HP’s customers are being asked to abandon their investments in HP’s AlphaServer- and PA-RISC-based servers and adopt EPIC architecture if they want to continue running their advanced HP/UX and NonStop environments on HP high-end servers.

Given this situation, I fail to understand how HP can claim that no other company offers as complete a product portfolio as HP. What this situation means is that HP’s high-end, scale-up Itanium-based processors offer far less computing power than expected by many in this industry – and to me, it means that HP’s scale-up server strategy and product line is broken.

The HP Supercomputing Disappointment

HP’s broken scale-up strategy also manifests itself in supercomputing. In the supercomputing industry, companies that build high-end servers usually let advanced features and functions that they build for supercomputing environments "trickle down" or "cascade" into enterprise systems architectures, then into the midrange, and ultimately to the low end. Now, look at HP’s situation. Once a leader in supercomputing with its PA-RISC-based entries, HP’s Itanium-based (EPIC) processors show poorly in the Top500 supercomputer listing (only two IA-64 based systems were in the Top500 list - at positions 165 and 427 respectively). To me (and I think most industry analysts would agree), this shows that HP is not investing properly in advanced EPIC-based systems designs - and this bodes extremely poorly for the competitive future of HP’s IA-64-based EPIC (Integrity) lines of processors.

Another way to read the Top500 list is to look at HP’s overall supercomputer market penetration rate. HP has a whopping 42% of this market - with 208 sites using Intel-based x86 architectures. With this many installations, it is clear HP is investing: in commodity x86 architectures. And this also tells you a lot about what HP really is in the server market: it is an x86 server company - or, to be even more precise, HP is an x86 blade maker.

When several of us analysts listen to many of HP’s marketing pitches, some of us like to joke that HP’s new marketing approach is : "blade is the answer - now what’s the question?"

The way that I now look at HP in the server business is that HP is no longer a credible high-end, scale-up systems vendor (given its lack of investment in EPIC-based servers as evidenced by the Top500 supercomputer list - and the limited market acceptance of its EPIC architecture). The company’s move to EPIC architecture has been an immense failure.

Will the Real HP Please Stand Up?

HP’s own marketing materials (http://www.hp.com/hpinfo/newsroom/HP_in_brief_010309.pdf) acknowledge that some people think of HP as a printer company (note: over 20 percent of HP’s revenue [$26 billion] comes from its printer division); others think of HP as a PC company (and in the PC marketplace, its primary competitors are Lenovo and Dell); and still others think of HP as a data center company. HP goes on to argue that it is clearly a printer company, that it is indeed a PC company, and that it ships almost 1/3 of all servers sold worldwide. HP also boasts that it makes telephone calls possible for over 100 million mobile users on a global basis; and helps 50 million customers share over 4 billion photos on-line.

When researching HP, the picture that emerges from HP’s own description of itself is that it is a maker of consumer technologies (cameras, personal computers, and other devices); a maker of x86 computer systems (personal computers and servers); a maker of management software; and a provider of IT professional services:

In the consumer business, HP now competes with a wide variety of consumer product makers;
In the systems business, HP now competes directly with Dell and Lenovo directly – and on occasion with IBM and Sun in blades/x86 engagements. Given its scale-up systems situation, however, I no longer consider HP as a rival Sun and IBM in enterprise class systems (despite the existence of its Itanium-based Superdome); and,
HP’s acquisition of EDS makes HP a logical competitor of IBM as well as a competitor of its partners (such as Accenture, et al). It is my belief, however, that HP has jeopardized its professional services channel by buying EDS – so I’m not convinced that buying EDS was a really good decision for HP).

From a positioning perspective, what this means is that HP is now aligned to compete head-to-head in lower margin, commodity-based consumer and computing businesses. Gone are the days when HP was a strong, scale-up rival of IBM and Sun in the computer systems business. And gone are the days when HP can argue that no other company offers as complete a technology product profile as HP...