Number 89 (Update of Volume 8, Issue 11)

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HP's weak quarter pulls down Dow

HP's financial news drove down the Dow on Aug. 20, little more than a week after the company had introduced more than 150 new consumer products and gathered its faithful at the feet of CEO Carly Fiorina in Atlanta. One day after the company had posted a 52-week high stock price, HP released a third quarter report that had little good news, more bad, and even some worse as it peered into its near future.

Despite posting a profit of $287 million for its sales period ending July 31, HP's news spurred millions of shares downward more than 10 percent the day after the report. In a remarkable day for the company's stock, HP shares made up more than 4 percent of all transactions on the New York exchange, with 51.2 million shares selling down in less than 7 hours. HP's normal volume is about 11 million shares a day, but on Aug. 20 the company led the NYSE's most actives by a 2:1 margin over Lucent. Those Lucent shares traded at one-tenth of HP's share price. More than $1 billion in HP market capitalization changed hands for the day, and HP shares lost $100 million in value. The next day brought no rebound, either.

CEO Fiorina admitted that the company should have done better in a period where its only operating profits came from support, services and the company's bulwark printing and imaging group. The printer business accounted for 86 percent of the company’s operating profits for the third quarter. HP's enterprise systems business continued to post red ink, but HP's biggest misstep of the period looked to be trying to compete with Dell on PC pricing. HP announced it was raising PC server prices to make its PC unit profitable once again. Dell immediately countered this week with a notice that it will lower its PC prices.

Analysts said HP showed revenue growth over last year's third quarter only because of the weakness of the US dollar. HP Services -- the company's support arm that will offer almost all of the opportunity for 3000 sites to spend money with the company next year -- showed a $337 million profit for the period. But the red ink at Enterprise Systems, which makes the HP-UX and NT servers which HP wants customers to buy to replace their 3000s, widened from $7 million to $70 million. HP also took another $376 million in restructuring charges and $141 million charge to amortizing goodwill, so the profit for the period totaled out at $287 million.

Despite the sour news, Fiorina predicted that all HP units will be profitable in 90 days, when the company reports its fiscal 2003 totals. The worse news came in the company's response to the poor showing, as well as its forecast for its future. In addition to raising PC prices, the company's response included a new round of layoffs; 1,600 more employees will be cut. HP doesn't see an upturn coming for IT spending, and it predicted it will miss analysts' forecasts for its next round of revenues and profits, too. Dell, which Fiorina derided in a recent Fortune.com article as "only a distributor," reported $621 million in profits one week earlier, more than twice HP's earnings. The competitor against the Compaq-HP PC line showed more than $1.3 billion in sales growth over its year-earlier quarter. Analysts estimate that Dell's overhead to make and sell PCs is less than half of HP's overhead. HP can't adjust prices on its PC lineup as quickly as Dell, either, because it sells about 80 percent of PCs through dealers and retailers.

Not all layoffs are at HP

HP has given thousands of its employees the gate since its merger with Compaq, but its biggest competitor executed layoffs as well. IBM gave more than 14,000 of its services employees pink slips as of June 30, and plans to lay off 600 more employees from a microelectronics unit that already furloughed 1,400 people earlier this summer.

The layoffs were revealed in an SEC filing that also reported on the final price for IBM's acquisition of PricewaterhouseCoopers. HP tried to buy PwC in the fall of 2000, but had its board of directors kill the deal when HP's stock value didn’t measure up as expected. IBM paid just under $4 billion for the consulting business -- an operation that HP tried to buy before it moved on to acquire Compaq's services force and the merger which that deal required.

HP World shows far fewer MPE faces

Although Interex's executive director said that 571 HP World attendees came from the HP 3000 camp, news from the exhibitor and volunteer community indicated a conference with MPE numbers well below prior meetings. Ron Evans told OpenMPE listserver members on Aug. 20 that more than 8,400 people attended last week's show in Atlanta, including about 800 HP employees involved in sales efforts.

Both the user group's chief executive, as well as board member Denys Beauchemin, were quick to defend the show's attendance numbers, figures which have been unaudited throughout the 29 years of Interex history. Exhibitors and volunteers pointed out in Internet postings that the grand totals don't reveal all the story about who made the trip to Atlanta for the first combined conference between the Compaq/Digital user group Encompass and Interex, with HP as the third partner in the show.

The user group presented its Hall of Fame Award to long-time volunteer Jerry Fochtman, who headed up the MPE content track for the conference for the third straight year. Board president Barry Breig said the award went to Fochtman for a career full of service to the user group, from chairing the SIG-IMAGE group to being instrumental in launching the first All-Texas user group meeting in 1990.

Fochtman weighed in on the attendance perception after the conference. When a string of messages surfaced on the 3000-L mailing list about Interex's post-show survey, one attendee asked if only 5,000 had appeared in Atlanta. Fochtman said in reply, "I understood the number to be over 8,000. However, from my perspective this year is the lowest turn-out of MPE'ers I've ever witnessed in 20-plus years."

One vendor who serves the 3000 community said from their booth on the show floor's front row that they'd gathered 170 customer leads on the first day, but saw contacts dip to 76 on the second day. Session rooms for MPE-focused events always had fewer than 50 members present, and often fewer than 20, a fact easily confirmed by the slick new attendance system installed outside each room. Interex’s Evans said the group will switch back to its own registration system for next year’s show, since attendance breakdowns were still unavailable to Interex more than a week after the show closed.

HP 3000 business manager Dave Wilde's kickoff talk was the most populated session we attended. There may have been a possibility to see more MPE faces at once in a reception later that evening, but that event was cancelled after HP pulled out. Hoping to cut travel costs in the tough IT economy, many people were trying to leave on Thursday evening, when the Interex party took place. The show floor was full of hungry attendees Wednesday night, when exhibitors hosted tables full of pizza, hot dogs, chicken and free beer.

One MPE exhibitor wanted more detail on who was at HP World, hoping to discover how much of the crowd was users rather than HP staff, speakers and prospects. HP World attendance, Birket Foster noted, is made up of many different parts. "It would be useful," he said in a posting to OpenMPE's list, "to see the number of attendees broken out in categories of:
1) End-users who paid for the privilege of attending
2) The speakers who were granted attendee badges for giving a talk
3) Vendors' personnel (excluding HP - the biggest Vendor)
4) HP personnel (we know this was a big training event for 800 HP System Architects who were teaching both end users and the HP folks on the latest from "palmtops to Non-Stops")
5) Exhibit passes issued

Some SIG leaders at the show speculated that the light turnout might have reflected on the fact that customers have heard enough about migration from vendors of such services, and don’t have budget to execute right away. HP World’s content managers explained in July that some 3000 papers were not accepted because the user group believed fewer homesteading customers would attend than migrating users. But the group’s Evans said Interex doesn’t have any favored destination for its MPE members and attendees.

“We have no agenda in terms of pushing homesteading or migration as the best alternative,” Evans said. “In fact, in trying to reach out to more members in need of exploring the options we funded a second e3000 Solutions Symposium event [this spring] on the East Coast, even though there was a small turnout and it was a financially draining effort.” In contrast, HP World, “was an overwhelming success, bigger than last year's event. Interex will continue to run this event for its membership next August in Chicago.”


Will 6.5 live even longer?

If the MPE community found its numbers reduced at the HP World conference, the meeting still carried its share of news and controversy for the 3000 customer. Early in the week HP announced it is considering an extension to the support life for MPE/iX 6.5. HP based its proposed extension – nobody knows how much longer HP might want to support 6.5 – on the fact that half of the 3000’s customer base is running on 6.5 and older releases. HP’s 3000 R&D manager Ross McDonald offered that fact in a meeting of software vendors, but almost immediately the vendors voiced concern over the support extension. Representatives from Cognos and ERP app provider Exegesys said such an extension would send the wrong message to the 3000 customers -- making the users feel like HP will give them longer to exit the platform.


Emulator, schmemulator:
how about just buying PA-RISC chips?

Customers at HP World heard the first hard proposal for an emulator project to extend the life of the system’s PA-RISC hardware, when Strobe Data owner Willard West announced he wants his company to be the first to market with a product that emulates the HP 3000 systems. Strobe, which makes emulation products for Data General, DEC PDP-11 and HP 1000 computers, plans to buy PA-RISC processors from HP to create a hardware card that customers can plug into PCs.

West said he’s in an NDA standoff at the moment with HP over the deal, since Strobe is requiring HP to sign an NDA before it can discuss the details of the design of the product – and of course HP wants an NDA, too. He expects to resolve the standoff, since Strobe has already established a working relationship with HP for its HP 1000 products. West said the best long-term product for HP 3000 hardware emulation would be software-based, but apparently wants to enter the market with a hardware-based product.


Swap that software until Oct. 2

One of the great traditions of Interex and its annual user shows lives on this month, as the user group continues its Contributed Software Library Swap Tape project. Information for the tape, a collection of user-written programs for the HP 3000, is available at www.interex.org/cslform.html.

You don’t have to belong to Interex to participate, and you don’t even have to attend HP World to get in on the project. Just submit program contributions by Oct. 2. Contributors get a copy of the tape, with three years’ worth of programs on it, as well as an Interex Value Membership or a $25 Amazon.com gift certificate.