Hewlett-Packard, the world's No. 1 maker of servers, said on Thursday that sales of its mission critical servers based on Intel Corp.'s Itanium processors declined year-over-year. HP's customers delayed installations as a result of Oracle's decision to cease support of Itanium and uncertainties caused by the demarche. Nonetheless, HP believes that there is a bright future for its business critical systems (BCS) business.

"Revenue in business critical systems declined 9% year-over-year. This decline is sharper than expected as our ability to close deals has been impacted by Oracle's Itanium decision and orders are being delayed or canceled. We are working diligently to enforce the commitments that Oracle has made to our customers and to HP," said Catherine Lesjak, chief financial officer of HP, at the quarterly conference call with financial analysts.

According to HP's financial statement, the company's business critical systems division earned $486 million in Q3 FY2011, down 9% from the same quarter a year ago and down 13.2% from $560 million in Q2 FY2011 (it is necessary to note that HP performed changes to some of its accounting methods and added networking to its enterprise servers and storage division).

Companies, who use mission critical servers, are usually very large and their datacenters may cost tens or hundreds millions of dollars. Naturally, they do not deploy systems that can become obsolete if their software is out-of-date. But HP believes it can deal with uncertainties about the future of Itanium.

"In business critical systems, we firmly believe that HP Itanium-based server platform is by far the best in the industry, and we are fully committed to its future. In fact, it is the strength of this platform that is likely behind all those approach to drive customers away from HP technology. We are doing everything we can, including pursuing legal actions, to protect our customers and our business against all anti-customer behavior.

Recently Oracle said that it would cease to develop software for Intel Itanium processors and will concentrate on creation of applications for its own Sun SPARC- based machines, IBM Power-based systems as well as various x86-based servers. Intel Itanium-based systems are currently available from HP and SGI with the former commanding the lion's share of the IA64 business with its servers running HP-UX. A substantial number of servers powered by HP's version of Unix also runs Oracle software and therefore those, who use HP-UX Itanium-based machines now will have troubles upgrading servers with new software from Oracle.

While officially Oracle said that its decision to drop Itanium support from future programs was motivated by the fact that Intel Xeon processors can easily serve mission-critical applications, it is believed that the move was motivated by the company's intention to improve positions of Sun SPARC servers on the market of mission-critical systems.

There is also confusion about Oracle’s intentions to support Red Hat or SUSE Linux; several customers reportedly said that their Oracle sales teams had told them that Oracle would not support either of these variants in the future, but only Oracle’s own branded Linux.

Tags: Oracle, HP, Itanium, Red Hat, SUSE, Linux, HP-UX, IA64, Sparc, Sun