HP, Brocade, and Verizon

Well, it’s official; HP is not going to spin out its PC operations.  Some (most, on the Street) are hailing the move as a reversal of a crazy notion of the now-gone Leo Apotheker, but as I’ve noted in earlier blogs, I’m not so sure.  I do believe that the tablet won’t sweep the PC from the market, and the latest quarterly numbers seem to demonstrate that.  However, there seems little question that the margins are going to sink even more, and that PCs will have to be a part of a larger consumer electronics ecosystem.  That’s what I’d like to focus on now.

HP’s TouchPad tablet was also a casualty of the PC-spinout decision, and in the context of getting rid of PCs keeping tablets was arguably a bad move.  But keeping PCs and ditching tablets?  It’s hard to see how HP could possibly sustain that kind of decision, so I think it’s obvious that HP is now going to be a flagship player in Microsoft’s Windows 8 play.  In fact, I would expect to see the two companies strutting around and hinting coyly about what’s to come.  Yes, it means trashing the WebOS stuff that HP also paid for, but hey that was Leo and this is Meg, right?

Another company with more than its share of problems is apparently going back on the block.  The Street rumor is that Brocade is looking for a buyer, a private equity firm.  Some of my sources say that the company would have liked for IBM to buy them (heck, I’d like IBM to by ME; listening, Armonk?) but that there’s too much in their portfolio IBM isn’t interested in.  There are also some rumors that the company was shopped to Oracle, who is said to be looking for a network vendor.

The problem Brocade has is that the Foundry acquisition never gelled.  In survey after survey of enterprises, the company’s strategic influence was in the single digits.  In the preliminary results from our current survey (incomplete at this point) four out of five buyers said they didn’t know if Brocade had a cloud strategy at all.  Given that cloud computing is a big driver of data center change (more on that in December!) a lack of cloud position for a data-center network vendor is the kiss of death.

Moving on to the network operators, Verizon is launching its managed monitoring service across pretty much all broadband US markets, including those where it has no footprint at all.  This is an illustration of yet another benefit of “service layer” or “cloud services” in a revenue sense.  An operator can add new customers without building out expensive loops to them, and if the managed services offerings are symbiotic with their mobile services (as Verizon’s are to a degree at least) then there’s pull from monitoring to other traditional services, not to mention pull to other cloud services.  Imagine service ARPU growth from non-network customers!

The “service layer”, meaning software frameworks that create application platforms, may now be a factor in the enterprise space too.  The advent of OpenFlow switching threatens to create a commodity switch architecture that could become a standard for the data center even if neutrality rules make it unlikely it will grow beyond that into the Internet.  Now Facebook’s Open Compute Project is going to have its own (Facebook-sponsored) foundation to promote open standards for the data center.  That would, among other things, put pressure on HP and other providers of servers, but it would also play to some real user changes in the cloud.

I’m telling you now that even based on preliminary results, the enterprise survey underway here is showing some truly radical shifts in cloud thinking.  I noted as long as a year ago that buyers who were actually involved in cloud projects underwent a transformation of viewpoint as hype gave way to reality.  Now we’re seeing the mass of buyers who have been transformed growing large enough to create cooperative communities of interest and to push their visions out to the sellers.  As a result, it’s very possible (even likely) that the whole conception of “the cloud” is going to change.  That could be really good news for someone like Brocade or HP who are trying to get into the cloudlight a bit late.  Or it could be really bad news if they don’t pick up on the trend.


Leave a Reply