HP boss Meg Whitman says that companies trying to build their own servers — without the help of traditional server giants like HP — are having little success due to the global hard drive shortage.
Speaking on her first quarterly earnings call since taking the reins at HP eight weeks ago, Whitman said that a small number of companies are skipping server vendors like HP and building their own machines — and that this number is getting smaller. “We hear all the time that people are building their own servers,” she said. “I will tell you right now that they are not building their own servers … they’re all calling us right now because they don’t have the ability to get the drives.”
Some of the world’s biggest hard drive makers have been hammered by monsoons in Thailand, which have caused the worst flooding there in 50 years. Western Digital, Toshiba, Samsung, and Seagate all make hard drives in Thailand and analysts are expecting global hard drive shortages could last until July of next year.
In recent years, companies that buy tens of thousands of servers have started to cut traditional server makers out of the deal. They’ve been going to the Taiwanese companies that make server motherboards for the HPs and Dells of the world and buying their servers direct. Nobody knows how many servers move through this murky market, but HP is clearly paying attention.
Whitman said that because of HP’s long relationship with hard drive makers, it’s going have access to more hard drives than anybody who tries to go it alone. “We began pulling in inventory and made strategic buys of hard drives back in October,” she said. “I think we will get more than our fair share of hard drives here.”
“I think there are going to be some shortages in Q1 and Q2,” she added. “I think this is going to be pretty tough for the industry.”
HP has been in chaos since former CEO Mark Hurd was forced out in August 2010. His successor, Léo Apotheker was dismissed about a year later. The company said it was maybe going to get out of the PC business a few months ago, and then changed its mind. On Monday, it said that it was taking a $3.3 billion writedown on losses stemming from its disastrous push to build an Apple iOS competitor, called WebOS.
The company had to spend $142 million just to get consumers to take its WebOS-based TouchPad devices off its hands, selling them this past summer at fire sale prices.
During Monday’s call, Whitman ran the standard plays from the Troubled Company CEO playbook: She set expectations low, promised change, and said that HP was going to build its own technologies, rather than spend a lot of money acquiring them. In fact, she doesn’t expect HP to spend more than $500 million on any acquisitions in the year ahead. That’s pretty good for a company that just spent nearly $12 billion for British software maker Autonomy.
“We cut out a lot of muscle in R&D in this company and we have to invest back in it,” she said. “We’re making some long-term bets here because we just can’t continue to run this company for just the short term.”
Update: This story was updated to include the Fiscal 2011 writedown cost of WebOS