EDS and HP News and a Motorola Surprise

Electronic Data Systems Corp. (EDS) posted strong second quarter financial results while Motorola Inc. delivered a surprised second quarter profit. In other news, Hewlett-Packard Co. (HP), the proposed acquirer of EDS, announced new disk backup systems with data deduplication technology.

Focal Points:

• EDS reported second quarter revenues of $5.62 billion, up from $5.45 billion in the year-ago quarter. Net income for the quarter on a GAAP basis was $160 million, up from $138 million in the prior year's second quarter. In the Americas, the company said sales fell 6 percent due to contract renegotiations and other factors, even though its U.S. government business grew 6 percent. Contract signings for the quarter were up 27 percent over the year ago quarter. Meanwhile, EDS shareholders have approved the merger with HP. The transaction is expected to close in the third quarter of 2008.
• Motorola reported revenues of $8.08 billion for the second quarter of 2008, down from $8.73 billion from the year-ago quarter but better than expectations of $7.5 billion. Net profit for the quarter on a GAAP basis was $4 million, due to cost cutting and a strong performance from businesses other than its handset division. This compares to a net loss of $28 million for the same period the previous year. Operating losses in the company's all-important cell-phone division increased to $346 million from $332 million. Motorola's Home and Networks Mobility and Enterprise Mobility divisions delivered strong sales of $2.7 billion for Home and Networks and $2.0 billion from Enterprise Mobility. The company managed to hang onto its number three position in the global handset market, shipping some 28.1 million handsets during the quarter. However, the company is very reliant upon North American sales, with 48 percent of the devices shipped to that market. Motorola is still preparing to spin off the handset division and expects to complete the split in the third quarter of 2009.
• HP announced disk backup systems with data deduplication technology for remote and branch offices, small and medium sized data centers, and large enterprises. The HP StorageWorks D2D Backup Systems (D2D) 2500 emulates up to six tape devices, has a raw data capacity of three terabytes (TBs), and is designed for remote and branch usage. The D2D 4000 is designed for small and mid-sized data centers, emulates up to 16 LTO tape autoloaders, and has a raw data capacity of up to nine TBs. The D2D 2500 and 4000 systems are available now and have an entry price of $6,499. For large enterprises, HP is making available "accelerated" deduplication with its HP StorageWorks Virtual Library Systems (VLS), according to the company. Data deduplication is performed after the backup has completed writing to disk. The system accelerates data restores by maintaining only the most recent copy of backup data while eliminating duplicate data from previous backups, according to the company. Accelerated deduplication is available for license now with the HP StorageWorks VLS6600 and VLS9000 series. Licensing for the VLS6200 and VLS12000 models will be available in September. Pricing is based on physical capacity, officials stated.

Experton Group believes the services sector shows continued strength, as companies seek to limit hiring and utilize outside resources. Motorola's performance, on the other hand, remains uneven and may be a precursor of further spin-offs or divisional divestitures. This should be the last quarter EDS reports its earnings; however, it is well positioned to enhance HP's services business once the companies merge and organizational issues are resolved. Conversely, IT executives should expect continued tough times at Motorola. IT executives should pay careful attention to Motorola's performance and corporate actions, and should make sure contracts provide them with the flexibility needed to deal with a smaller Motorola, a standalone spin-off, or an acquired division.

Experton Group believes data deduplication is a key feature that IT executives should be including amongst its storage systems requirements. It can reduce the demand for space by up to 95 percent, depending upon the application. This technology can cut operational costs through the reduction in the need for added storage, floor space, and power and cooling, as well as potentially relieve some of the nightly workload. Since the technology differs by company and storage system, IT executives should perform a detailed analysis on the actual functionality provided by the systems under consideration.