Hewlett-Packard Co. blindsided analysts with news that its third- and fourth-quarter earnings would badly miss estimates primarily because of problems in its server and storage division.
HP's enterprise servers and storage division saw third-quarter revenues fall 5 percent from last year to US$3.4 billion. Breaking down the results, HP said there was a 32 percent decline in Alpha server revenue, a 25 percent decline in NonStop server revenue, and more than a 15 percent drop in storage revenue. Three top managers in the company's server and storage division paid the price for the poor results. Peter Blackmore, head of business sales, and two lieutenants, one in the United States and one in Europe, were let go. Blackmore was the highest-ranking former Compaq employee at HP.
In a call to analysts, HP CEO Carly Fiorina blamed some of the problems in the division on migration to a new SAP system that shut down production for six weeks instead of the planned three weeks. She also cited channel problems in Europe for the division's poor results. She said the company's server and storage division is expected to return to profitability in the fourth quarter.
HP said its other divisions showed sales gains this quarter. The company announced it earned 24 cents a share on revenue of $18.9 billion in the third quarter, a 9 percent increase from the 2003 third quarter.
The HP news came just as Dell Inc. announced strong results with many products in similar markets. Dell's revenue rose to $11.71 billion, up from $9.78 billion for the third quarter a year earlier.
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