The Intray

IT giant rejects claims of market share squeeze

Hewlett-Packard’s buoyant quarterly results and a number of recent British contract wins is testament that the firm has proved its critics wrong and successfully pulled off its merger with Compaq, according to one of the computer giant’s top executives. Steve Gill, vice president and managing director of HP in the UK and Ireland, painted a rosy picture of current operations during his address to the Institute of Directors in Glasgow last week.

Refuting claims of being squeezed

Gill refuted claims from the technology press that HP was being squeezed between rival Dell, which was increasingly moving into low-end servers, and IBM, which was soaking up the consulting services market – a stinging remark considering HP’s failed bid for the consulting arm of PricewaterhouseCoopers.

He said: “Do I feel we are stuck between two rocks? Absolutely not. Are we growing quicker than everybody else? Definitely. Do I feel bad that we didn’t do the deal with PricewaterhouseCoopers? No. I think we’re feeling absolutely fine at the moment.”

“We’ve exceeded expectations of all those who thought the merger would fail. Two years on, we no longer talk about the merger but the value we can add to the customer.”

Surge in share prices and strong performance

Shares in HP surged this month after it reported a 34% gain in world second-quarter profit to $884 million, with revenues topping $20 billion on the back of record sales of PCs, computer hardware to corporate customers, and continued dominance in printers, ink, and other imaging products. The UK and Ireland subsidiary now accounts for 10% of HP’s overall worldwide revenues and if listed on the London Stock Exchange separately would rank as the 35th largest company.

“For the last three quarters, we’ve outsold Dell on a worldwide basis in PCs,” Gill said, adding that UK sales of industry standard servers had increased more than Dell. “Our managed service business is growing at 50% per annum.”

Significance in the British market

Gill pointed to a number of recent partnership deals as a sign of HP’s significance in the British market, including a contract with BT worth over £1.5 billion over seven years. Gill said the company’s overall strong performance bodes well for its manufacturing operations in Scotland, which builds low to mid-range servers through to super-computers.

Commitment to Scottish facilities

Concerns over the American firm’s long-term commitment to its Erskine facility were raised last November after HP announced that it would outsource 260 staff to employment agency Manpower, effectively ending its direct employment of production workers north of the border. Gill said he was surprised by this reaction.

“We thought that was a positive signal. We made a decision which was consistent with the changes taking place throughout our world organization. If we weren’t going to stay in Scotland, we wouldn’t have made that decision, we wouldn’t have bothered,” he explained. “Given Erskine is one of our key manufacturing outlets for our industry standard servers, as that business grows, we would see more business flowing into Erskine. It’s an extremely important link in the pipeline.”

Focus on financial services and SME market

According to Gill, IT spending among corporates is recovering most significantly in the financial services industry, which is consolidating legacy systems following merger activity. HP, like its main rivals, is also concentrating resources towards wooing Britain’s small and medium-sized enterprises (SME).

Gill claims the product generates a 20 to 30% improvement in productivity as work time is not wasted travelling back to the office to pick up work and messages. HP is currently evaluating a UK-wide roll-out.

“We see huge opportunities in the SME arena, and so does everybody else. What’s required though is solutions. Instead of people trying to sell into the SME market boxed products, these businesses really need answers to business problems. Companies that come up with ways to allow SMEs to utilize technology and get the same benefits enjoyed by the large corporates will be successful.”

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