Hewlett Packard had a disastrous fourth quarter performance in the Unix market after production problems meant it failed to ship a single K-class server, its crucial midrange product, during all of December.
The company was hit by a double whammy of production problems that led to the cut off in supply of K-class servers, which fill its crucial mid range Unix market ? typically at costs between $100,000 to $500,000.
First it discovered it had failed to order enough of the Sram memory chips it uses in the K-class, which it buys from IBM, to meet demand.
Then it was found out that at a key production plant in Puerto Rico, a number of system boards were failing electrical tolerance tests. Only one in 1,000 a spokesperson said, but enough to require the halting of production while the potentially faulty boards were tracked down and new testing procedures instituted.
Ironically, HP said the problems were exacerbated by a rise in demand for the K-class. The extent of the damage caused by problems only emerged this week as figures for the fourth quarter were revealed by analysts.
?HP had tremendous production troubles in the fourth quarter and delivered only about 25 per cent of the expected amount of the popular K580 [for example]. Once production problems are over, they are believed to go strongly ahead again,? noted Kirsten Ludvigsen, analyst at IDC.
Taking IDC?s figures for Western Europe just in the high end performance server market alone, which IDC defines as servers above an average system revenue of $250,000, HP?s market share was half as much as the same quarter the year before. Revenue growth was negative by more than 43 per cent quarter on quarter, dragging growth for the whole of 1998 down to only 5.6 per cent.
This compares to 18.8 per cent annual revenue growth at IBM and 48 per cent for Sun Microsystems, in this segment of the market. HP would have been hit at least as badly in the under $250,000 section of the market, where the K-class is a top performer. Overall the K-class earns between 60 per cent and 70 per cent of HP?s total Unix hardware revenue.
Nick Earle, marketing director at HP, admitted that although orders remained on the books ? so the revenue could still be accrued this quarter - some orders could well have been lost because of the delay.
?It was not good at all,? he admitted.
He also said that he could not guarantee that no affected models had gone out, but said in the unlikely event the board failed, no corporate data would be affected.
HP is believed to have received some complaints from end users about the delay, but Earle would not name affected companies. He said all the problems were solved and models were shipping by January.
The production problems have only compounded HP?s difficulties in this section of the market, with users either delaying K-class purchases or expecting major discounts, because it is being replaced in May by the Prelude server, requiring users to make a complete box swap to upgrade.
* HP also announced this week some revisions to HP UX 11, its 64 bit Unix operating system that was released in November of 1997. The update adds the capability to run 32 processors and 32Gbyte of memory, additions to the system resource management software to handle more I/O, processors and memory, and support for the euro currency.
These additional functions are available for purchase in extension packs from 1 March in the US and shortly after in Europe.
HP UX 11.1, with Numa and extended clustering capabilities, is expected to be released sometime in the third quarter of this year.
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