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Past Symposium/ITxpo
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Thursday, 14 November 2002 A reality check on the fortunes and dangers confronting hardware’s “powerhouse vendors” was presented by analysts Betsy Burton and Matthew Boon on the third day of Gartner Symposium/ITxpo 2002 at Darling Harbour, Sydney. The Burton and Boon show enthralled a packed house as they picked through the strategies of Cisco Systems, IBM, Hewlett-Packard, Sun Microsystems, Intel and Dell. The pair gave IBM and Dell the best reviews and paid special attention to the troubles and challenges confronting Hewlett-Packard in the aftermath of its merger with Compaq. Burton said HP needs to cut another US$2.5 billion in expenses to meet its pre-merger promise to the market that swallowing Compaq would decrease the costs of both companies by US$5 billion. With a show of hands, the audience indicated they do not believe HP CEO Carly Fiorina could make the target – a skeptical response compared to the split vote from the audience at US Symposium a few weeks earlier. “If HP cannot make the savings,” said Ms. Burton, “then they will have to find an extra US$15 billion in revenue to make up for the bottom-line shortfall.” She did not bother to ask if the audience thought HP could do that. Mr. Boon said HP’s problems were compounded by news that former Compaq chief Michael Capellas was leaving the merged organization. “This is very early on in the merger process,” said Mr. Boon. “I’m surprised that it has happened so quickly. This will upset a lot of former Compaq staff.” An Achilles’ heal for HP is its reliance on the consumer-driven printers unit, which represent 200 percent of the profit. “In other words,” said Ms. Burton, “printers are fuelling the rest of the business.” The emergence of Dell in this market may cause HP serious problems. “It could easily come in an erode HP’s position and that would put even more pressure on HP’s financial position,” she said. Dell is the shining star in the Burton and Boon analysis. Not only does it promise to rattle HP’s cage, but also to go after the networking business of Cisco and the storage space dominated by one of its strategic partners, EMC. Mr. Boon observed that the cozy relationship between Dell and EMC is causing “a lot of questions to be asked,” indicating that he believes Dell might buy out the storage expert. Ms. Burton said every competitor she interviewed spoke of Dell in admiring tones. “It is the vendor on everyone’s lips,” she added. Dell has made a strong entry into the service and consulting business in Asia/Pacific,” Mr. Boon continued. “Many companies aspire to achieve what Dell has accomplished in the supply chain arena. They are a great example of creating profitability in the volume space.” Similar accolades were pinned on IBM with both presenters pointing out how its diversity of business has saved the company from being as ravaged as its competitors following the downturn in the IT market. “IBM was not perceived well in the dotcom boom because it was slow-moving,” said Ms. Burton. “Today, their diversity of portfolio is seen as a strength and this has worked to their advantage.” She also said IBM needs to clean-up the branding of its hardware products, confessing her confusion about the difference between the “p” and “x” server range. “Sometimes IBM does its branding very well, and sometimes it doesn’t,” she said. The issue of Linux quickly emerged in the IBM discussion. Ms. Burton, continuing to drink an enormous polystyrene cup of Starbucks coffee, said IBM enjoys being seen as “cool” by developers who are keen to promote open standard software. However, US customers are still skeptical despite the IBM alliance with the No.1 Linux distributor, Red Hat. Mr. Boon countered that enthusiasm for the IBM and Linux is far greater in the Asia/Pacific region. “A reason for this difference is that Linux adoption is being driven by a general dislike of Microsoft, especially in countries such as China,” he said. Boon and Burton agreed Sun Microsystems should be pushing IBM harder on Linux, but it isn’t happening. “It should be a no-brainer for Sun,” quipped Mr. Boon. “Sun,” said Ms. Burton “always has great ideas, but getting them out to market is a problem for them. With software, they end up giving it away. But they are getting much more serious now.” Mr. Boon said that Sun had had a “bad wrap.” “Sun is a sound company,” he continued. “In this region, they are doing very well. I’m asked daily if they will survive because of the fall in their share price. But we are getting much too hung up on what a share price is supposed to mean. “However, I’d have to say that Scott McNealy (Sun’s chairman) must squirm when he hears his partners, like Oracle, talk about the future of Linux because it is seen as a departure from Sun’s own operating systems.” Switching to Cisco, Ms Burton stunned her audience by declaring that “most of you are over-paying for their products.” “That’s not about to change,” she continued. “But Dell is moving into this space, so we have marked Cisco pricing as a strong negative.” Ms. Burton described Cisco as the “Nike of the hardware industry,” relying on brand to get them over the line. “I love listening to John Chambers (Cisco CEO) speak,” she said. “He spends 50 minutes telling you how he’s going to save the world, and ten minutes talking about products, technology and strategy. He’s great at branding.” Burton and Boon had some simple advice for hardware buyers:
Mark Hollands Gartner Staff |
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