News release

Strong Growth Projected for IT Consolidation Market

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HP today unveiled new research that indicates IT consolidation will grow at a strong rate in the coming years.

The research, conducted by market intelligence firm IDC, reveals that the IT consolidation market is expected to grow 6.5 percent from 2004 to 2009, from $18.1 billion to $24.7 billion, outpacing growth of the overall IT market.⁽¹⁾

The IT consolidation market forecast figures reveal growth trends within each of the four major enterprise technology categories that HP serves: storage, servers, infrastructure software and services.

With a portfolio that spans the data center to the workplace, HP has positioned itself to lead the growing IT consolidation market. HP IT Consolidation, an HP Adaptive Enterprise solution, includes standards-based hardware, software and services that enable customers to reduce their data centers, consolidate servers and storage systems, integrate application environments and address other consolidation needs.

According to the report:

• Infrastructure software for consolidation is expected to grow 13.1 percent – more than twice the rate of the underlying IT consolidation market. In part, this growth reflects an increasing acceptance of the need for, and benefits to be gained through, virtualization and centralized management.
• Consolidation will play a significant role in driving server and storage sales. Server consolidation’s share of the overall server revenue is predicted to grow to 12.6 percent in 2009 (up from 9.5 percent in 2004). Similarly, the storage consolidation market is expected to grow to 17.3 percent (up from 13.9 percent in 2004).
• Consolidation growth will occur in heterogeneous environments: Linux, 14.4 percent; Windows®, 9.8 percent; and UNIX®, 1.2 percent. Linux represents an emerging growth opportunity for consolidation, particularly for servers and software (22.3 percent and 22.0 percent, respectively).

The need for IT consolidation and its underlying technologies have gained widespread acceptance in recent years. A separate IDC consolidation survey of 400 senior IT executives revealed that 60 percent view consolidation as an important step towards dynamic IT, while 80 percent are actively consolidating.⁽²⁾

“The issue isn’t whether or not companies will consolidate. The issue is approach,” said Matthew Eastwood, vice president, IDC. “This research indicates that the sooner companies embrace IT consolidation as a core business strategy, the sooner they will be able to achieve the kind of flexible and dynamic infrastructure that helps solve business problems like increasing revenue and satisfying customers.”

According to the report, several technology and IT management trends will continue to drive growth in IT consolidation, including:

• Improving technologies such as blade servers, multi-core processors, virtualization and partitioning;
• The ongoing need to update and improve disaster recovery and security solutions;
• System and software standardization initiatives;
• Chief information officers’ (CIOs) desires to free budgetary and personnel resources from maintenance and management in order to reduce costs and drive innovation;
• IT consolidation’s capacity to help CIOs face the challenges of driving down costs while increasing system responsiveness and providing better services.

“We are witnessing a new wave of IT consolidation that directly reflects our customers’ desire to leverage IT to compete more effectively,” said Steve Fink, director, IT Consolidation Solutions, HP. “There is a perceptible shift from pure cost-based, hardware-centric efforts to integrated, long-term strategies that realign the IT infrastructure with business goals.”

IT consolidation growth consistent across global regions and vertical industries

The long-term IT consolidation opportunity rests primarily with large companies, but is expected to spike in the small- to medium-size business market in coming years. Growth is expected to accelerate 11.4 percent yearly with small businesses (1-99 employees) and 10.3 percent yearly with medium-size businesses (100-999 employees) as technologies that enable consolidation become more affordable and the recognition of superior return on investment with IT consolidation grows.

North America will lead IT consolidation growth at 7.7 percent yearly due to the prevalence of distributed computing. Growth in Europe, the Middle East and Africa; Asia Pacific; and Latin America will be somewhat slower at 5.7 percent, 5.4 percent and 5.3 percent, respectively.

There is no breakout leader for IT consolidation growth among major vertical industries. Public sector leads with 7.5 percent growth; network service providers follow with 6.9 percent; manufacturing and distribution at 6.2 percent; and financial services industry at 5.5 percent.

The IDC report on IT consolidation was commissioned by HP.

More information about HP’s solutions for IT consolidation is available at www.hp.com/go/itconsolidation.

About HP

HP is a technology solutions provider to consumers, businesses and institutions globally. The company’s offerings span IT infrastructure, global services, business and home computing, and imaging and printing. For the four fiscal quarters ended April 30, 2006, HP revenue totaled $88.9 billion. More information about HP (NYSE, Nasdaq: HPQ) is available at http://www.hp.com.

⁽¹⁾ IDC, “IT Consolidation: Understanding the Market Opportunity,” May 2006.

⁽²⁾ IDC, “Server and Storage Consolidation 2004: End-User Summary Report,” March 2004.

Windows is a U.S. registered trademark of Microsoft Corporation. UNIX is a registered trademark of The Open Group.

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of HP and its consolidated subsidiaries could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to anticipated operational and financial results; statements of expectation or belief; and any statement of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the achievement of expected results and other risks that are described from time to time in HP’s Securities and Exchange Commission reports, including but not limited to the risks described in HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended Jan. 31, 2006, and other reports filed after HP’s Annual Report on Form 10-K for the fiscal year ended Oct. 31, 2005. HP assumes no obligation and does not intend to update these forward-looking statements.