HP refines sales strategy, plans new midrange servers

Hewlett-Packard Co. is tweaking its direct sales strategy and readying a new line of midrange Unix servers in a bid to reinvigorate sales that have been slowed down by the softening economy, the dot-com collapse and turmoil in the computer maker's marketing channels.

HP recently instituted its "Hard Deck" program, under which it has identified and listed about 500 of its largest customers. The company plans to sell its products and services directly to those users while leaving other customers to be handled by resellers, according to HP officials.

The goal is to address growing concerns that HP hadn't clearly differentiated which users it would deal with directly and which it would allow resellers to approach, said Mark Hudson, a global marketing manager at HP. The vendor last month said channel-conflict problems contributed to a sales slowdown that affected revenue and earnings in its fiscal first quarter ended Jan. 31.

HP also intends to be more active in generating potential customer leads for resellers via advertising, direct mail campaigns and joint sales efforts that will be overseen by a new group of field alliance managers, Hudson said. "We're putting more feet on the street to ... help generate more demand for [our resellers], he added.

Sorting through these channel issues should help both HP and its customers, said David Krauthamer, manager of information systems at Advanced Fibre Communications, a maker of telecommunications equipment that uses HP systems. "There always seem to be a lot of people looking to sell you HP [technology]," he said.

HP is also readying new midrange servers and workstations based on its next-generation PA-8700 chip, which will debut at speeds ranging from 600 Mhz to 800 MHz. The first systems based on the new chip should begin shipping sometime in the second half of this year, Hudson said.

HP's moves come at a crucial time. The company has recently lost market share in the highly competitive server market to both IBM and Sun Microsystems Inc., and HP's high-end Unix revenue declined 54 percent in the first quarter compared with the same period a year ago.

Sales of HP's long-awaited Superdome enterprise Unix servers -- the company's answer to Sun's popular UE 10000 system -- haven't taken off quickly following the introduction of the machines last year. Exact installation figures aren't available, but even HP officials acknowledged that early Superdome sales have been slow.

"The major issue they are facing is that Superdome is not delivering the performance that a lot of people were expecting," said Humberto Andrade, an analyst at Technology Business Research Inc. in Hampton, New Hampshire. "It has not been the big breakthrough that was promised."

But according to Hudson, the slow sales have more to do with the longer sales cycles that are typical for high-end servers than with any performance issues. With prices ranging from US$400,000 for a 16-processor server to more than $1 million for a 64-way box, it's taking HP much longer to close deals for Superdome than it does for lower-end servers, he said.

HP has also had to refocus its efforts in the dot-com market. Last year, the company was among the most aggressive server vendors in announcing alternative financing schemes and revenue-sharing deals for users. But with the dot-com meltdown, Hudson said, HP is now being much more selective about doing those kinds of special deals.

"HP has had some very strong competition, particularly from Sun," said Gordon Haff, an analyst at Aberdeen Group Inc. in Boston. Sun has focused closely on data center applications and Internet service providers, Haff said. By contrast, he added, HP hasn't shown "the same clarity of vision and consistency of strategy."

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