COMMENTARY -- Printers outweigh servers in the minds of investors at the moment.
Hewlett-Packard (NYSE: HWP) shares are rising today even as Xerox (NYSE: XRX) sinks in the wake of another quarterly warning. The prevailing view for the past couple of years has held that photocopying is being displaced by the act of downloading files and turning them into hard copies with inkjet and laser printers -- a market that HP has long dominated.
But at the other end of the commodity printing business sit servers, especially Unix machines, which were a sore spot with HP analysts following the company's third quarter earnings call. Amid much fanfare and hype, HP last month launched its long-awaited SuperDome line, designed to drive the company's business in the high-end Unix market. It represents HP's latest best chance to boost server sales to a level that would make company observers happy.
Thus, no one would have been surprised if HP investors showed a bit of nervousness today following an announcement from IBM (Nasdaq: IBM), which has repackaged its entire server line, even turning System 390 in "zSeries 900".
IBM claims massive performance from its new hardware line, but there's a bigger sign Big Blue is trying to head off Sun (Nasdaq: SUNW) and HP: no MIPs based pricing for the new Big Iron babies. IBM will rely on usage-based charges, something rolled out by HP with SuperDome.
So IBM's new offerings would seem to present formidable opposition. But does Wall Street care? Not a bit.
Shares of IBM fell almost 4 percent by early afternoon following the news about servers, while HP shares gained almost 3 percent. The other leg of the server Big Three, Sun, was down slightly. Just to throw in a smaller player for some added context, VA Linux (Nasdaq: LNUX) also dipped.
Clearly, HP is shrugging off the trend in the server subset. Maybe people continue to see HWP mainly as a printer provider. That wouldn't satisfy the all-in-one, e-Everything image promulgated by HP's executives, but they can always keep plugging away with the garage ads until the point hammers home. In the meantime, it's not so bad being seen as a printer outfit.
Also keep something else in mind: in spite of all the hand-wringing about the Gates-Jobs pact at the time it was announced, Microsoft hasn't significantly altered the way Apple does business. If you liked Apple in 1997, Microsoft probably hasn't done anything to change your mind.
Expect the same to happen here. And at least Corel shareholders don't have to live with the image of Bill Gates' head looming over their CEO.
Earth to Wall Street: remember that revenue warning Intel released last week? Guess what? It's still valid -- Intel warned of a weak September. And don't forget that the Semiconductor Industry Association's report includes all chip segments, such as digital signal processors, flash memory for wireless phones and other areas that Intel doesn't touch; in other words, the overall semiconductor industry can grow well without Intel strength. 22GO>