Daily Archives: May 21, 2010

HP’s Hurd Vague on 3Com Integration

In a previous blog post, I cited a Computing (UK) story suggesting that HP could take another 18 months to fully digest its acquisition of 3Com. Subsequently, many observers were interested in learning whether the post-acquisition integration would actually take that long. A few intrepid journalists even went to HP directly with questions on the matter.

By all accounts, HP has offered ambiguous answers. Even HP CEO Mark Hurd wasn’t particularly helpful when he was asked about the 3Com integration during his company’s earnings conference call earlier this week. What follows is an excerpt, borrowed from Seeking Alpha, of that exchange:

Richard Gardner – Citigroup

I was hoping you could give us an update on the 3Com integration just in terms of your plans and your progress with sales specialist hiring, getting the sales force trained on the new product portfolio and getting the product in front of customers in the U.S. and Europe and any color on early customer reception to the portfolio and how many customers are willing to take a look at it now that it’s under the HP umbrella.

Mark Hurd

Let me give you a quick trip through HP networking so I can try to give you context and fit 3Com into it.

Again, we have a continuation of strong performance in what we call pro curve HP networking. Edge products, wireless products saw 31% in the quarter. That’s organic, obviously very strong for us.

Simultaneously, it’s important to note that we’ve been building software capabilities in ESN. We talk about this product call Virtual Connect. It is nothing more complicated that – most of the networking market is sold by number of ports. Those ports aren’t always fully utilized. Virtual Connect actually virtualizes those ports.

So as a rudimentary example, if a customer is usually buying 10 ports, we can virtualize them and perhaps reduce that by 30% to 40% so they now need six ports. Our strategy is then to come in with the best performing products and the best TCO in the industry to then actually work with the customer on those ports.

Historically, we’ve been on the edge of wireless. Now with 3Com, we can do the exact same thing in the data center. So for us, we’ve had a very good start with 3Com. We have been aggressive in hiring, hiring has started, and hiring is ramping.

In the quarter, 3Com, we closed two fortune logo accounts with 3Com products in the data center. We also had a number of very significant wins on what you would think of as the traditional pro curve line, and had a very strong virtual connect quarter as well.

So the reason I bring that up to you is to give you context that our networking strategy isn’t a 3Com strategy. It’s not a pro curve strategy. It’s not a virtual connect strategy. It’s an all of those capabilities brought together across the HP portfolio and it’s why we talk about this converged infrastructure; that the ability to leverage IT from the server family, the storage family and the networking family became so integral to our overall story.

So we think a very good start, we’re very excited about it. We’ve installed products. The 3Com technology is now in our data centers and is now performing our networking tasks. We plan to do more and more of that and so we feel very excited about it, and specialist hiring is ramping.

Hurd says a lot but he doesn’t provide a detailed answer to the specific question that was asked. From Hurd’s reply, we can conclude . . . what, exactly? Well, things are off to “a very good start,” and HP is “very excited about it.”

Beyond that, however, we don’t get a lot of detail on how the integration is going, whether it has gone more smoothly in some areas  as opposed to others, and whether the field-sales teams have been integrated and properly trained to bring combined 3Com-ProCurve HP Networking solutions to customers.

We can only assume that Hurd is being intentionally vague. We’ll have to get the straight goods elsewhere. Meanwhile, we can speculate, which is what I’ll be doing in a subsequent post.

Components Shortages Affecting Vendors Worldwide

At the moment, components shortages seem to be pervasive in the technology industry. Vendors large and small, throughout most of the world, have been affected by them to greater or lesser degrees.

The problem appears to be with us for a while. To be best of my knowledge — and I will concede at the outset that my research hasn’t been definitive — vendors everywhere in the world are having difficulty sourcing adequate numbers of many types of components. The only exception is China, where vendors in telecommunications, cleantech, and other fields have not reported that same component-sourcing difficulties that have hobbled their counterparts in Europe, North America, and other parts of Asia.

That doesn’t necessarily mean that Chinese companies aren’t affected by components shortages. All it means is that they haven’t reported them, at least in the English-speaking media I’ve perused. Still, it’s a development that bears watching. In that China does not ascribe to the tenets of unfettered capitalism, it sometimes operates according to a unique set of rules.

Today’s component shortages span various semiconductor types, including but not limited to DSPs, FETs, diodes, and amplifiers. Vendors of solar inverters, particularly those based in Europe, also have been affected.

Meanwhile, Reuters reports that a shortage of basic electrical components could last into the second half of 2011, limiting the ability of telecommunications-equipment manufacturers to respond to improving market demand.

Reuters reports that memory chips and other fundamental components such as resistors and capacitors are in short supply after their makers slashed output, fired staff, put equipment purchases on hold or went out of business during the recession.
The shortages already have been blamed for weaker-than-expected results last quarter at telecommunications-equipement vendors Alcatel-Lucent and Ericsson, which really don’t need the added grief.

Alcatel-Lucent blamed components shortages for a large loss that it posted in its first fiscal quarter. Alcatel-Lucent’s CEO Ben Verwaayen said the said the shortages involved “everyday” low-cost components. He explained that most components come from China, where the manufacturing industry hasn’t been revamped since major cuts that followed the severe global downturn. 

We already know that the supply-chain issues that afflicted Cisco’s channel partners and customers were blamed partly on component shortages.
What’s more, Dell partly blamed shortages and higher costs of components, including memory, for its inability to maintain gross margins during its just-reported quarter.

And AU Optronics, Taiwan’s second-ranked LCD manufacturer and a supplier to Dell and Sony, reported that an LCD panel shortage is likely to last into the second half of this year.

By no means are those the only vendors affected. You only have read the recent 10-Qs or conference-call transcripts of companies involved in computer networking, telecommunications gear, personal computers, smartphones, displays, or cleantech hardware to understand that components shortages are nearly everywhere.

I just wonder — and I make no accusation in doing so — whether Chinese manufacturers are as affected by the shortages as are their competitors in other parts of the world.