HP drops the ball..

DevilWAH

27th stocks review: The tech sector traded mostly lower, led by Hewlett-Packard. Shares of H-P slipped 3% to close at $12.36 to qualify as the worst performer among Dow components;

I wonder if getting in to a court battle is there best plan of action, court battles make investors hold back, and with how things are going that is the last thing they want. over 2 and a 1/2 years of steadily falling stocks no one can argue they aren't struggling now.

tpatt100

Isn't Cisco sort of in financial problems as well? I keep hearing how they are over priced and the company relies on reputation to justify high prices?

My "keep hearing" is from tech blogs so I could be clueless.

ptilsen

Cisco is doing fairly well from a business standpoint. It is considered a fairly safe investment, if not likely to see high growth. HP is not a very good investment right now as the business is in big trouble.

Our perceptions as technical professionals don't translate that well into assessing how the business is doing. Despite HP's strength in the markets we experience (e.g. enterprise infrastructure such as servers, storage, and network), it is doing very poorly as a company and all signs point to this continuing.

it_consultant

Cisco has weakness in the switch and router market where they are losing ground and even losing some money. However, they sell a bunch of other stuff that is not routers and switches with very high profit margins so they are looking good in totality.

A lot of this is tea leave reading and...does it really matter to us? I remember when it was a sure bet that IBM would be sold off in pieces, now they are highly profitable.

astorrs

it_consultant wrote: »

Should we continue on this path, or would you like to review the features of the Brocade VDX switch before you assume that the Brocade can't do what a Nexus can do.

I've got to agree with it_consultant here. Stop drinking the Cisco Kool-Aid for a minute, put away the marketing white papers/data sheets and do some research. While they might be a market leader in most, they're by no means the thought leader in many of the markets they play in - heck in some markets they're nothing more than "also ran's".

Data center switching is core to Cisco, but I'd be fine using either Juniper (QFabric is pretty neat) or Brocade (VCS = FabricPath) to fill that role.

DevilWAH

Why has this developed in to a CISCO vs HP thread??

CISCO, Microsoft, Interl.... are all slowly improving there market position as a company.

HP has been on a steady decline since 2009, indeed as I said before they are at a 10 year low (back to where they were in 1995). ITs not a question of how good there products line up against the competition. The company has lost of 50% of its stock worth in less than 2 years, when I am doing a tech refresh one thing I look at is how the company has been preforming business wise over the last few years. A core switch might be expected to have a refresh cycle of 5+ years. HP has shown no sign of leveling of or growing, so in less time than that we could see the bottom drop out of there business.

From what I see they are having financial issues, and yet still have failed to show a clear stratagory to deal with it, Make me nervous investor.

it_consultant

From a perspective of an IT person - one who may buy a bunch of HP equipment, why should you care where there stock price is? If you were simply an investor, this is the best time to buy, they are cheap. They aren't going to go the way of Kodak. The things you will probably buy have little chance of being killed off, being spun off isn't so bad either. I still see Lucent phones plugged into Avaya phone systems.

HP is kind of a big ugly monolith and truthfully, they should spin off their PC division. That really helped IBM even though, at the time, everyone screamed and figured they would go bust or get bought out. Neither actually happened. We aren't talking about a McData who was a clear acquisition target. HP servers, storage, and switches are going to stay alive. Hell, Compaq has practically stayed alive.

DevilWAH

it_consultant wrote: »

From a perspective of an IT person - one who may buy a bunch of HP equipment, why should you care where there stock price is? If you were simply an investor, this is the best time to buy, they are cheap. They aren't going to go the way of Kodak. The things you will probably buy have little chance of being killed off, being spun off isn't so bad either. I still see Lucent phones plugged into Avaya phone systems. .

Because if I am investing millions of my company money in to a networking company over the next 2 to 3 years, I want to make sure that I am getting the best return, and the return I get from the equipment that comes through the door is only half the story. There is also the question of the development that money is paying for, for when it comes to the next refresh cycle. I don't just look at the offers on the table here and now, but the road map the company has, and the things they are telling me are "just around the corner". I have a target date that is in 2018 for the accumulation of many project coming together. Which means I will pass though at least one refresh cycle on the way there, so I want to be confident as possible that the road map a company presents me is realistic and they will deliver on it.

HP are telling me from one side there will be moving there products lines towards the Comware from there 3COM takeover, while others say the 3COM line will be discontinued. While others say they will for the foreseeable future develop there current line and the 3com legacy in parrallel.

When you are trying to build a consistence solution with a long term view, if a company can't tell you where they expect to be a year down the road, let alone 2 or 3, it puts them at a signification disadvantage. It also makes you question if the features they are promising for Q2 and 3 next year will arrive as they are promising. No one wants to put time and effort in to learning and developing one solution only to have to re think it later on.

HP has the issue also of not being an innovator, something IBM was and is. HP very much take existing ideas and deploy them in cost effective ways. If you look at HP servers, storage and networking there is nothing groundbreaking in what they do. They make good, but not great products. we saw the same with apple, while there desk top was not a bad machine it was nothing spectacular next to a windows desktop. It was not untill the I PHONE came along that they had some thing to offer that no one else did, and the rest was history. Hp in my view is in the same place, there are plenty of other networking companies like Juniper and Brocade that could easily fill there shoes. While lots of players are starting to make inroads in to the low to mid range networking area and taking business from HP and CISCO alike, CISCO will remain in the high end market for many years to come. There over all business may shrink, but they currently have that nich area to retreat to. HP on the other hand don't have this. They have the innovation of CISCO above them, and the up and coming below them. There is of course no reason to suggest they will go the way of the Dodo, apart from the fact they are not telling any one how they propose to do this, and all indications show they are on a downwards path. There is a time at which it will be to late to create spin off and save the business as a whole.

I would happily talk to Brocade or Juniper, ass you see in them a real drive to be the next big networking vendor and both have the history to make it. HP.... you go to there HQ and play in there lab's and it all just feels a bit rushed and not polished. with to many "Q2" next year... or "early next year".... When I am parting with £100K's I expect a straight answer and feel confident in the products and company. I am the one who has to mange my network, How a company runs there business is reflected in the quality of what they produce. When I see a company badly managed at the top, I question the products coming out at the bottom.

Lizano

it_consultant wrote: »

I remember when it was a sure bet that IBM would be sold off in pieces, now they are highly profitable.

Well they did sell the PC business to Lenovo.

it_consultant

And HP should sell its PC division to its chinese manufacturer or whoever.

It isn't reasonable to expect that soon after the acquisition of a competitor that their lines will be completely integrated. That didn't happen with Cisco and CATOS, so why are you applying this standard to HP? If you want a consistent line either buy all 3COM or all ProCurve. I can hint strongly that the ProCurve OS and ASIC are not going to go away in favor of the 3COM setup. Dell wont magically merge the Force10 Products with their powerconnect line for a while. I am not defending HP for any particular reason, hell, I am getting rid of them at my work.

I am probing the idea that the stock value of a company or a bad investment have a large determination in a technical decision. I could see if HP was about to collapse or if they were about to be taken over...but that won't happen in the hardware lifecycle of whatever switches or servers you would end up buying today or by end of year.

sratakhin

Can anybody explain me why stock prices matter so much here? If investors buy and sell stocks, how does it affect the company? They won't get more money to spend on R&D or whatever just because their stocks are trading higher and vice versa.

DevilWAH

The price of stock doesn't, but a company that is contently falling in stock value (assuming the number of socks stays constant) generally is an indication of underlying problems. When you look in to the reasons the stock is falling in a company you get an idea of the health of the company.

Any company that loses half its stock value in less than a year, has had is credit rating downgraded a number of times in that same period, has had to write of $15+ billion in bad takeovers, and has a insistence management structure. Does not show that every thing is rosy with how the company is heading.

tpatt100

From my armchair stock analyst viewpoint which is next to worthless, stock prices-analyst projections make good blog filler material. Companies regularly beat past year profits but analysts say they failed to meet expectations and in tech I see this with Google, Apple and a few others. They beat last years sales, experienced growth but blogs post "failed to reach analyst expectations".

Of course DevilWah is correct stock prices do reflect problems but overall drops in prices here and there is what dominates some tech blogs to create interest.

it_consultant

Companies have business cycles, like anything else. Often, the position in that cycle has little to nothing to do with the quality of the product you are getting. People are still buying HP blade centers religiously because they are better than Dell and both better and less expensive than the Cisco product. The question to the potential blade center buyer (other than is it really appropriate to HAVE a blade center) is: 'do you think that this company will go belly up within the lifecycle of this product'? I would confidently bet against that happening. In many ways our product is no different than any other machine covered under traditional industrial economics. Will the tool do what you need to to do in the budget you have, yes or no?

Even if the company does go belly up then you can still fill your industrial need with their product. For example, you could still buy a used Saab and it will still drive you to and from wherever you need to go fairly reliably. Maybe if you are in the middle of South Dakota parts supply might be an issue. Heck, it was an issue BEFORE they went under.

As far as Devil's original idea of using ProCurves as access switches. Why not? You aren't looking for any special innovation with access switches, they are packet movers for end devices. I have used hundreds of 3500yls and they work fine. It is easy to tag and untag VLANs, it is easy to set up routing, it is easy to set up LAGs, it is easy to configure STP. They have excellent warranties, literally the only time I have sent one for replacement was one that was hit by lightning. Even if the company is being STOOPID you have to realize that they have been producing switches since the mid-90s and they are the second largest by volume against Cisco. They do have a depth of knowledge in switching including interopability with other manufacturers. Even if they are spun off or purchased your potential investment is pretty safe.

DevilWAH

OK lets take a racing car (my company), I decided to buy a engine from Ford, and build the rest of my car around it (management system monitoring, backups....), each year I replace the engine (life cycle) and each year I know because I work with ford and they have a clear road map that the new engine will drop in to place and I can carry on racing the next year with out any fuss..

One day ford goes under and can't supply me with an engine any more... So I have to go to BMW, there engines are a different shape, now not only do I have to get to know a new engine, but the rest of the car now needs to be altered to, now I am going to have a whole season of development to get back to where i was, before I can start movign forward again.

Same is true in IT, you don't work to wards the next refresh cycle, (yes that a good opatunity to review and make changes) but you look for consistence across the business moving forward. If your running a race car and a company offers you two engines one that's long and narrow the other wide and short. Then tells you they are not sure what till happen next year, they might run them both, or they might only develop one but not sure at the moment which one. Even if they are the cheapest you might decided to wait to see what happens. Yep sure the wide short one you brought might still be around in 10 years, however no longer developed, while the long narrow one is now several generations on and the class of the field.

Maybe I should have gone for Jaguar, cause they only have a single engine, a clear development plan for the next 5 years and have a history of sticking to it. So I know not only will what I buy now work for me now, but plans I have for the future they will also be able to support.

ptilsen

The analogy may be fun, but it doesn't work for several reasons. First, Ford's owners would be required by law to provide parts for any car. Publicly traded companies don't simply disappear from existence when they become unprofitable. They go into bankruptcy and get sold off or reorganized. Even if Ford stopped making cars as a result of being unprofitable, someone would have to continue making parts.

HP similarly has warranties on switches that they have to uphold. If HP went under, again, it would go into bankruptcy and get split and sold. Even if it meant the end of the networking division, someone would be liable for the products and agreements in place. Liabilities don't get to disappear from bankruptcy. At best, they're delayed.

Regarding the market in question, we have highly inter-operable products based almost entirely on standards. Even if HP falls apart and cannot adequately service product in-lifecycle, realistically you will be able to get by just fine until it's replacement time.

From an investment standpoint, HP is not a smart bet right now. They have a very strong potentially of dropping to close to $11. But there is simply no chance of chapter 7. Even chapter 11 is unlikely. Worst case is that they will spin off or close unprofitable divisions. The stock will be highly volatile, but the profitable divisions will largely function business-as-usual. From a technical standpoint, I'd have no problem using HP, and I sure wish he did use HP instead of Dell (not that Dell is doing great).

it_consultant

Your right, but your concern, IMHO is overblown. So what if they bought 3COM, there will be Pro Curve ASIC based switches for the next 10 years. They aren't going anywhere. Like I said, 2nd largest switch manufacturer with a loyal customer base and gaining ground against Cisco. Even if the people you talked to couldn't talk to the intimate details of HPs strategy over the next 5 years doesn't mean that there isn't a plan in place. You can simply look to the history of the HP networking line, they have had a great market position for years. Do you worry that Cisco catalyst will go away because Cisco bought Meraki? Of course you aren't, Meraki is small fries compared to Catalyst. Similarly, 3COM is small fries compared to Pro Curve.

I see two things holding you back:

1 - HP is not Cisco
2 - You think HP is in a weaker position than it truly is and you are using that to reinforce your already developed opinion about almost any Cisco competitor

I noticed we went over Brocade but many people I know that made the transition off of Cisco went to Juniper. Why are they not a consideration?

DevilWAH

Brocade are, I am considering them as the data center as well.We have a large FC estate that we are thinking of moving to Iscsi and I really like Broacdes solution to this.
Juniper for switching aren't some one I would look to go to, have used there routers and although different would be happy to use them. Fact is we have perfectly good CISCO in place but in a few years I will review that.
and CISCO aren't even in the ball park when it comes to wireless.

So no my choice of who to use in any new projects has nothing to do with CISCO, its about a company who's switches I have used in the past, and have come back to use now, and don't feel they offer a consistent product. add there current issues to the pot and they are not attractive to be investing millions in.

And yes of course the car analogy is silly but that's the point..

HackedAlias

To me this is reflective of the entire company as a whole. As a network engineer I have to manage numerous sites that run only HP networking(Procurve switches, Wireless controllers) and being primarily a 'Cisco guy' it wasn't difficult to pick up and configure one with no prior HP experience. That is where the pleasantries stop. The hardware is finicky at best, I have to have their equipment RMA'd constantly because of 'bad hardware'. Their engineering support pales in comparison to cisco tac. If you have a Priority 1 network down situation and they can only recommend a software upgrade before jumping straight to an RMA (this has happened no less than 5 times to me in the last year alone), then there is something seriously wrong. And on top of this the inexperience of the engineers I've worked with is astonishing and no amount of haggling or begging will they ever escalate to a higher level engineer or join you remotely to look at the equipment. It's a complete joke in my opinion.

While I agree that it isn't always in a company's budget or needs for an enterprise solution but at some point you have to take into account what your network is worth to your company. I know that if I were to be implementing a solution for my network I would side with the vendor that has competent engineers and backs their products to the fullest. Maybe I'm speaking out of my bad experiences with the company but this is just my take.