In HP's fy Q1 2007 earnings conference call the situation of HP's storage business as doing little more than treading water overall was confirmed.

HP Chairman and CEO Mark Hurd said: "Enterprise Storage and Servers grew 5 percent year-over-year to $4.5 billion. Operating profit was $416 million or 9.3 percent of revenue, up from 7.7 in the prior year period. We had a solid quarter in Industry Standard Servers with revenue up 10 percent year-over-year and share gains in every region. With Industry Standard Servers, we continue to show strong momentum in Server Blades with first-quarter revenue up 45 percent over the prior year period, reflecting strong customer acceptance of our c-class Blade offerings. Given our strong Blade growth, we expect this will drive significant share gains in the quarter."

"Revenue storage grew 3 percent year-over-year, and while I'm pleased with the margin improvement we've seen in storage, we need to drive stronger topline results in the business. To this end, we will continue to invest in sales coverage and storage sales specialists, as well as aligning to enterprise VARs and investing some of our margin strength back into demand generation. Weakness in tape and in the high end was offset by ongoing strong acceptance of our flagship mid-range EVA external array business where revenue grew 18 percent year-over-year."

Chris Whitmore, an analyst at Deutsche Bank, asked: "I was hoping to get more caller on the weakness in high-end servers and high-end storage, probably the one blemish from a marketshare standpoint. What is the underlying driver of that share loss, and related to that, can you speak to the sustainability of margin improvement in that segment given the mixed downmarket? Thanks."

Mark Hurd replied: "Sure. I think storage is kind of a more complicated story, so I will start with that. Our EVA line, which is kind of our flagship mid-range line, grew 18 percent. So that was good performance for us, and so we felt good about EVA in the quarter. That was pretty well true across regions and segments. So very strong performance there."

"We saw poor performance in tape, and you know, tape is the older part of the business. It is still a substantive part of our business, and tape declined faster than we would like. So, it's kind of a mix story that you've got to get into the piece parts and understand. So we feel very good about EVA. We think we could do better even though in EVA and some other parts of the core storage business."

"In the business critical line, which is the higher end stuff, I actually think that's a different story than storage. And there, we just had a weak quarter."

HP sees the need to have more sales coverage and to increase demand ofr its high-end drive arrays and tape gear. That will be difficult with tape declining generally. Hurd said nothing about storage product strategy. HP still awaits a new head for StorageWorks.