Hewlett-Packards Merced Division

1) In summer 1998, what is the position of the Enterprise Server Group (ESG) in its industry? How has it evolved? Why? HP, an international manufacturer of instrumentation, healthcare, computer and communication products, started up with initial investment of only $538 in the year 1939.It grew to more than $43B in sales and $3.1B in net profits in 1997.In 1997, HP formed Enterprise Server Group to focus on enterprise computing. ESG’s products were built based on proprietary RISC microprocessors and UNIX operating systems. ESG produced scalable, high performance computing systems, which were the backbone of corporate information networks, network servers and mainframes. Customers depended on ESG to run their businesses and to Web-enable their IT infrastructures. Around the world, ESG installed more than 1.3 million UNIX systems and in year 1997, while the total market estimated to be worth more than $60B.Since 1993, HP had been the number one position in UNIX server vendor by revenue with its HP-UX product line.
In summer 1998, there was tremendous pressure on Jim Davis, manager of ESG due to the downfall in the revenues and profits. The company had the opportunity to show improved results by strategizing its technology implementation decisions. There was an issue where Davis was to recommend whether HP should continue with the proprietary UNIX based Performance Architecture (PA) based on RISC microprocessor or shift resources to develop workstations and servers based on new chip, code named Merced and IA-64 architecture. In 1994, HP joined with Intel in development of a new 64-bit microprocessor to withstand the market competition and reduce the costs. This announcement appeared to everyone in the market that HP is pulling out of UNIX business and joining with Intel and Microsoft. Sun took advantage of this scenario and gained market momentum with the independent software vendor community, by