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Bull Joins OSDL

French server maker Bull joined the Open Systems Development Lab as a member of its data center Linux working group this week. Bull, which supports Linux on its Itanium-based NovaScale mainframes, which run the GCOS proprietary operating system as their main platform, wants to tap into the server consolidation possibilities that Linux is presenting to all server makers.

All of the big server makers are members of the data center Linux working group, and the addition of Bull to the group will add a considerable amount of Unix and proprietary systems expertise to the group. Bull sells IBM's Power line of servers running AIX under its own brand name, and, like IBM, the company wants to capitalize on the rapid adoption of Linux in the data center. Unlike IBM, however, Bull is an enthusiastic supporter of Intel's 64-bit Itanium processors. This is probably where Bull will be focusing its efforts. Bull is the indigenous computer supplier in France, but through a number of acquisitions over the past two decades, it has a small base in North America and a considerable server business across Europe.

HP, Bolstered By Weak Dollar, Beats the Street in Q2

Hewlett-Packard, like other major U.S.-based IT players with a large international customer base, said this week that a slightly improving spending environment, a weak dollar, and relatively strong foreign currency helped it show decent growth for revenues and profits in its most recent quarter. And it didn't hurt that HP is again chasing market share against its competitors, now that its customers are no longer sorting out the merger with Compaq last year.

For the second fiscal quarter ended April 30, HP reported sales of $20.1 billion, up 12 percent compared with the prior year. HP's chairman and CEO, Carly Fiorina, said that the company had double-digit revenue growth in every product segment except servers and storage, which experienced only an 8 percent revenue bump. After HP reimbursed the Canadian government $105 million for a disputed contract for goods and services that the Canadians said were never delivered, HP booked a profit of $1.1 billion in the quarter, up 77 percent compared with this time last year. (Fiorina said in a conference call with Wall Street analysts yesterday that HP intends to pursue the partners that did fulfill the contracts and get that money back in the courts.) Earnings per share were shaved by 2 cents because of this matter, with the company bringing in 29 cents per share after the settlement. That is still a 32 percent growth in per share earnings, which has to be making HP pretty happy.

But, as always, HP is balancing its optimism about its prospects with the realities of this difficult IT market. "Customers are very focused on value and on fast return on investment," said Fiorina. "Pricing remains very competitive." She said that HP would continue to focus on its "high-tech, low-cost, best customer experience" strategy in competing with Dell in the PC market and the low end of the server and storage businesses and with IBM across the IT spectrum. "We're gaining ground, despite the competitive rhetoric," declared Fiorina. Both IBM and Dell have been saying for the better part of a year that HP would be crushed between Dell's direct model and IBM's vast customer base and services orientation. Fiorina said that HP has been using pricing as a way to drive market share gains, and Bob Wayman, HP's chief financial officer, said that, as customers are shifting toward standard, low-cost components, he expects HP will continue to see pressure on profits. Like other IT hardware makers, HP is counting on having higher attach rates on servers, storage, and PCs, for other items like peripherals and services, in order to drive sales and profits. This is how HP plans to grow in an enterprise IT market that it skeptically has said will only grow by 1 to 2 percent this year, despite the better numbers consultancies and analysts are predicting.

HP said that the Technology Solutions Group, which was formed on May 1 and includes servers, storage, software, and services, accounted for $7.7 billion in sales in the quarter, up 11 percent, and posted an operating profit of $400 million, up $108 million from the second quarter of last year (if TSG had existed). The Enterprise Storage and Servers unit within TSG accounted for $4 billion in sales during the quarter, up 8 percent as reported, driven by a 15 percent uptick in ProLiant server sales. ProLiant volumes were up 32 percent in the quarter, according to Fiorina, who said that March and April set new record shipment levels for the company, and that blade server sales were double that of the second quarter last year. However, the product mix across the server lines is toward lower-cost servers and storage across all architectures, and combined with the deterioration in AlphaServer sales, it has been difficult for HP to grow overall server sales. (Think of the position HP would be in right now if it had not acquired Compaq.) She said that Itanium-based Integrity servers comprised 16 percent of sales and 26 percent of shipments in the Business Critical Systems unit, which includes HP 9000 and Superdome PA-RISC systems, AlphaServers, and Tandem NonStop systems. Fiorina said that Superdome orders and shipments set another record level, but, as always, she declined to be specific.

Novell's SuSE 9.1 Desktop Software Debuts

Novell has announced that it has started shipping its SuSE Linux 9.1 Personal and Professional editions, the first implementation of its software to employ the Linux 2.6 kernel.

As we reported in March, SuSE Linux 9.1 has 64-bit memory addressing on Advanced Micro Devices Opteron and Intel Xeon-64 processors and has support for file systems that are larger than two terabytes. The Linux 2.6 kernel has much-improved multithreading and multitasking. SuSE 9.1 Personal comes as a LiveCD that allows users to boot off of the CD and onto a 32-bit X86 processor and not actually install Linux on their machines until they like what they see. It costs $29.95, with 30 days of installation support. SuSE 9.1 Professional, which costs $89.95, is aimed at both 32- and 64-bit processors and includes 2,500 applications.

Red Hat Releases Fedora Core 2, Hires Legal Gun

A few months ago, commercial Linux distributor Red Hat decided to create a spin-off Linux implementation for the desktop, called the Fedora Project. The intent was to give away a free version of Linux for desktop customers and enthusiasts looking for the latest (and often buggy) technology and use it as a testing ground for new ideas and developing software. Red Hat has since rethought the desktop business and reentered it, but Fedora is still the hotbed for Red Hat's Linux development.

The company has, in fact, just announced the next iteration of Fedora, called Core 2, which runs on 32- and 64-bit X86 processors from Intel and Advanced Micro Devices (except the Intel Itanium, of course). Fedora Core 2 uses the Linux 2.6 kernel and includes the Security Enhanced Linux (SELinux) security extensions, developed in conjunction with the National Security Agency. SELinux provides a fine-tuned permission and access control that more closely resembles mainframe and proprietary systems.

Red Hat also announced that it has hired a new general counsel. Michael Cunningham, who was associate general counsel at IBM and general counsel of the PricewaterhouseCoopers consulting company before Big Blue acquired it, starts on June 1. Cunningham will be the front man as Red Hat defends itself against The SCO Group in the ongoing Unix-Linux legal battles. Mark Webbink, who has been general counsel at the company since 2000, will now be deputy general counsel in charge of intellectual property and public policy.

VMware, IBM Extend Alliance

IBM and the VMware unit of EMC announced last week that Big Blue has extended its strategic alliance to resell and support the VMware server virtualization products for the next three years. IBM and VMware entered a partnership in 2002 as IBM figured out that it needed a way of providing partitioning on its xSeries and BladeCenter server lines. IBM offers its own implementation of logical partitioning on its Power-based pSeries and iSeries line and has long since offered partitions for VM, MVS, Linux, and other operating systems on its mainframes.

The VMware unit, acquired by EMC earlier this year after quashing the idea of going public, says that the IBM deal demonstrates that VMware has managed to remain a neutral IT supplier even after being purchased by one of the fiercest rivals that the server makers, on which VMware depends, have in the market.

Offshoring Grows Quickly in 2004, but Analysts Say That Won't Last

IT analysts at Gartner and Forrester Research released new reports on offshore outsourcing last week, which highlight some interesting changes underway in the burgeoning global market for outsourced services. Gartner says offshore business process outsourcing of IT-intensive jobs will increase by a whopping 65 percent this year, amounting to $3 billion in spending by the end of this year. Gartner says, however, that the market will not be able to sustain such high revenue increases in the coming years. "Offshore BPO is an emerging, but immature, opportunity," said Robert Brown, principal analyst for Gartner's sourcing group. "There will be slower adoption of offshore BPO through 2007." Meanwhile, Forrester last week bumped up its projections of American job losses over the next 18 months by 40 percent. Forrester originally projected that 588,000 U.S. jobs in the services sector would be outsourced by the end of 2005, but last week the company said that new research indicates the figure will be closer to 830,000. Forrester said it bumped up its projections because of accelerating outsourcing activities, which it attributes to recent publicity given to the trend, from new services available from top-tier Indian outsourcing providers, like Satyam Computer Services, Wipro Technologies, and Infosys Technologies Limited, and from a rapid expansion in offshore outsourcing facilities by U.S. vendors IBM and Accenture. Forrester barely boosted its outsourcing projections for the long term. It now says that about 3.4 million U.S. services jobs will be lost by 2015, up from its previous estimate of 3.3 million.

IBM Opens Supercomputer Utility in Europe

IBM has opened the first of its so-called supercomputing on-demand utilities in Europe, after operating one in the United States for little more than a year. The facility, in Montpelier, France, is one of IBM's biggest centers of computing for its partners and customers. The center is gridded to the supercomputer utility that Big Blue set up in its Poughkeepsie, New York, data center in January 2003, so in a sense the Montpelier center is an extension of the Pokie center.

Since the point of grid computing is that workloads can be shared by machines regardless of their geography, it is not a coincidence that the two machines will have customers who think they are computing locally but may be doing it globally.

Indeed, IBM's first customer for the Montpelier center is actually a U.S.-based electronic design automation software maker Mentor Graphics, which is already a customer of the Poughkeepsie supercomputing utility and can now reach across the Atlantic to make use of the computing capacity in the Montpelier center, thanks to very fast networking and grid software.

Mentor Graphics seems to be the beta test for this approach, since IBM says that it will eventually offer simultaneous processing across the two centers to commercial customers, using the Globus toolkit and a fast network connection. The two centers are currently linked through IBM's private network, but an OC3 link will be installed between the two centers. Customers who sign up to use either center can establish secure virtual-private-network links among their users and the utilities, with up to 100 MB/sec of bandwidth.

The Poughkeepsie supercomputing utility has more than 2,300 servers, including pSeries 655 and pSeries 690 AIX Unix servers, various Intel-based xSeries servers running Linux and Windows, and Advanced Micro Devices Opteron-based eServer 325 servers running Linux. About a year ago, IBM started adding its BladeCenter blade servers to the mix, since these machines are more dense and are easier to manage and cluster than rack-mounted xSeries machines.

The Montpelier center has a similar mix of iron but less of it to start. Mentor Graphics plans to run jobs (basically benchmarking the performance of its software, which is a massively parallel supercomputer application that is used by chip makers to design chips) on big pSeries 690 servers in France, which are linked to xSeries Linux clusters in the United States.