HP Takes Away $75 Million in Biz From Sun With Linux

by Timothy Prickett Morgan

Hewlett-Packard did not have a lot of news at the LinuxWorld show in New York this week, but executives were on hand to brag about the $75 million in business it has stolen away from rival Sun Microsystems in the Unix business by selling former Sun customers Linux running on ProLiant and Integrity servers. While the amount of money is not a lot for these account wins, they can add up to a bigger piece of the IT budget at these new accounts for HP over time.

Sun started the latest round of installed base raiding in July 2003 when it launched an "HP Away" migration program to try to convince customers of the former DEC-Compaq Tru64-based AlphaServer line to move to Sparc/Solaris Sun Fire Unix servers. That deal, which generated 50 new customers for Sun between July and was set to expired on December 31 but has been extended indefinitely. Sun's executives said that at the current run rate, they expected the HP Away program to generate about $200 million in the first twelve months it ran.

In October, HP countered with a "Linux Lifeline" marketing campaign to go after the Sun installed base, which like the AlphaServer-Tru64 base, has a few disgruntled customers. Under the Linux Lifeline deal, HP gives companies with Sparc/Solaris platforms a market basket of services for assessing what they need to migrate as well as the actual porting and migration services to make a jump from Solaris to Linux on HP iron that are valued, according to HP, at $25,000. (Since IT vendors do not give list prices for services, it is hard to say if this is a lot or a little, a good deal or a great one.) This was a substantially beefed up version of a Solaris Migration marketing campaign that HP initiated in early 2003. The big news at LinuxWorld for HP regarding Linux Lifeline is that HP has also converted some 50 Sun customers to ProLiant or Integrity servers running Linux by the end of 2003, and that Linux Lifeline and the Solaris Migration deals together had generated $75 million in sales in 2003.

It is interesting to note that instead of attacking the Sparc/Solaris base with its own HP-UX servers, which use either PA-RISC or Itanium processors, HP initially only talked about pushing 32-bit Lintel server iron. A better match would be to push either HP-UX or Linux on the Integrity line of Itanium-based servers, and it seems likely that HP will begin pushing Integrity servers a bit more aggressively against Sun boxes. It would be best to do this before Sun gets its own 64-bit Opteron servers out the door later this year. It is also interesting that Sun has not yet countered with its own X86-Linux and/or X86-Solaris offering for HP's Tru64 customers. This may be part of its upcoming launch of 64-bit Opteron-Solaris servers.

In any event, Efrain Rovira, director of Linux marketing at HP, is very happy pushing Linux on Intel to Sun customers, and he said in an interview at LinuxWorld that the Sun installed base is still where HP is getting a lot of traction. He said further that when companies decide to get rid of Unix machines and want to move to Linux machines, they tend to re-examine their platform providers, and with HP being the dominant X86 server provider, HP gets a fairly large piece of that action. Being in the X86 server game is hard, said Rovira, and HP knows that racket better than Sun, which is a relative newcomer. "I am going to love Sun playing this game," he said gleefully. "Bring it on. Sun has yet to learn the major lessons that HP and Compaq have already learned about X86 servers." In particular, when you do not own the whole architecture, as Sun does in Sparc/Solaris, it is tough to plan for components to be delivered and yet build the fastest and most profitable machines. Sometimes Intel is late with a chip, and sometimes it is early; the same holds true for any other system component. "We have been at this a long time, and we know when suppliers are going to be late and we know when it will be early."

HP was also at the show to brag about its growth in total Linux-related sales, which it says hit $2.5 billion in 2003, up 20 percent from 2002's $2 billion in sales. Those figures represent all servers, storage, PCs, printers, and services that are sold worldwide with some sort of Linux angle to them. The bulk of that number is probably servers and storage, but HP declined to elaborate on how that $2.5 billion figure breaks down. As for future growth in Linux, Rovira said that based on the logarithmically climbing curve of Linux sales, HP's Linux-related sales should accelerate in 2004. He declined to offer any estimates because he likes his job and CEOs like Carly Fiorina frown on these numbers being divulged--especially during the quiet period prior to the announcement of financial results, which HP is in right now. What a convenient excuse quiet periods are for vendors. HP's Unix business is many times larger than what it is doing in Linux, and the top brass in its Enterprise Storage and Systems unit reckon that this is going to be the case for a long time to come because most Unix customers still like and want Unix for a lot of their workloads.