HP shares rose nearly 5 percent to $22.10, up $1.02 as of 11:15 am ET. Investors appear to be showing new confidence in HP and how CEO Meg Whitman is running the show. All the announcements that HP made yesterday bear repeating, because it was a busy afternoon:

 
Update: A few readers have written to point out I was wrong about HP’s old ticker symbol. It wasn’t HP but HWP. Silly me. Even so, if the Compaq name is headed for some lesser level of importance in HP’s future, then perhaps the Q in the ticker symbol, which was added as a nod to Compaq’s old symbol CPQ, to give the impression that the combination was more a merger of equals, should go. Given the choice between them, I would vote for HP. I should stress that I have zero indications that this is even under consideration, and is really just me ruminating.

Analysts had a mixed view. Chris Whitmore of Deutsche Bank Securities has been one of the more skeptical voices on HP’s turnaround prospects. “New sheriff, old game plan,” was the headline on his note to clients today. “We remain cautious on HP’s weak fundamentals, challenging macro conditions and deteriorating cash flow,” he wrote. Despite the beat on earnings, free cash flow — at $1.4 billion in the quarter — declined by half, pointing to what Whitmore calls “very poor earnings quality.” He rates HP as a “sell,” with a $20 price target.

Brent Bracelin of Pacific Crest Securities wrote that he remains unconvinced that an unexpected strength in HP’s PC unit is sustainable. “Apple and Samsung now account for 39 percent of market share across PCs, tablets and smartphones, and have a volume advantage relative to HP’s 6 percent share,” he wrote in a note to clients this morning. He rates the shares “market perform,” or neutral, and worries that HP’s biggest problem is that about half its sales are still tied to PCs and printers.

Whitman took to CNBC this morning to talk about HP’s situation. She portrayed the turnaround under way as about “10 to 15 percent” complete. That means there’s still a lot of work to do ahead. “We’ve laid a lot of pipe and done a lot of groundwork,” Whitman told the network’s anchors in a 13-minute appearance. I’ve embedded it below:

Other examples that have punctured my attention bubble in recent years are platform-as-a-service, infrastructure-as-a-service and storage-as-a-service, and there are probably many more. Then they get turned into ever-weirder acroynyms: Saas, PaaS, Iaas. You get the idea.

Today, Netsuite, the cloud player whose traditional approach is essentially to run your business from the cloud, today contributed its own new thing offered as a service: Commerce. (Cue the acronym: CaaS.)

One of the big things that businesses have to do is buy and sell goods and services from other businesses. The most basic example is that widget makers have to buy cardboard boxes from a supplier, because the goods don’t show up on the loading dock by magic. The same goes for every bit of physical stuff a business needs and also the services it pays for to keep its operations running smoothly.

Netsuite isn’t just managing the back-end business-to-business commerce, but also the direct-to-customer type of commerce. And the experience works pretty much anywhere a customer may be coming from: On a phone, tablet or PC, in a store or on social media.

As customers have essentially come to expect to be able to buy anything and everything online, the traditional back-end commerce engines like Microsoft Dynamics, Great Plains, Sage and even SAP were imperfectly combined with patchwork solutions for selling on the Web. And the bits of the system that faced customers have rarely if ever been unified with the ones that also face suppliers, which has a way of complicating things like inventory, the supply chain and everything else that stems from basic ebb and flow of supply and demand.

And things are getting even more complicated as machines are programmed to automatically buy things from other machines based on a pre-defined set of circumstances.

NetSuite has built what it calls a commerce engine — dubbed SuiteCommerce — that speaks directly to the core enterprise resource planning (ERP) and customer relationship management (CRM) functions that are already its bread and butter. In English that means that the new engine comes into the process already knowing what everything is, and also who everyone is. That makes it ready to wheel and deal not only with customers but also with suppliers. And when you get down to it, that’s a good way to reduce a lot of friction in any business, which is pretty much what cloud computing is supposed to be about.

The commerce service was probably the biggest news to come out of Netsuite’s SuiteWorld conference in San Francisco today, where CEO Zach Nelson (pictured) gave a keynote address. The company also announced a partnership with Square, the maker of little white credit-card reading thingies that you can insert into an iPhone or iPad for the purpose of accepting payment. Square’s Register application has been integrated with SuiteCommerce, so if you see more businesses using Squares, maybe this has something to do with it.

XtremIO makes storage arrays based on flash memory chips, and is a would-be rival to Violin Memory, the Silicon Valley start-up that’s revving its engine for an IPO later this year, following an $80 million Series D funding round which AllThingsD reported exclusively last month.

Another player in the all-flash storage array business is Pure Storage, which came out of stealth mode last August with a $30 million Series C led by Redpoint Ventures.

News of the deal gave shares of Fusion-IO a jolt. Fusion-IO rose 50 cents, more than 2 percent, to $21.63, just as the markets opened for trading in New York. As of yesterday’s close, Fusion shares have fallen by more than 6 percent since its IPO debut last June.

Fusion is a founding member of the Flash Madness Club. Its flash memory insert cards for servers are widely used in data centers of companies like Apple, Salesforce.com and Facebook, speeding up the ability of servers to process data by eliminating bottlenecks created by conventional hard drives. Its customers also include Hewlett-Packard, Dell and IBM among other server manufacturers.

Revenues were $11.6 billion, up 6.6 percent from the year-ago quarter, while per-share earnings on a non-GAAP basis were 48 cents, versus 42 cents a year ago, up 14 percent. That’s essentially right in line with what the consensus of Wall Street analysts had expected Cisco to report: $11.58 billion in sales, and 47 cents in per-share of earnings, with a penny-per-share beat on the EPS front.

I’m going quickly through the numbers, but here’s the announcement in full so you can look for yourselves. I’ll be dialing in to the conference call shortly and will be talking to CEO John Chambers after that.

Cisco shares are headed lower in after-hours trading. As of 4:45 pm ET, shares are down 48 cents to $18.30, or 2.5 percent.

Update: Cisco just issued its guidance on the conference call. CFO Frank Calderoni says that Cisco expects to report revenue to grow 2 percent to 5 percent year over year in the fourth quarter. It also expects to earn a gross margin in the range of 61 percent to 62 percent on a non-GAAP basis. Operating margins should be 26.5 percent to 27.5 percent, up about a point from the year-ago quarter. EPS will be 44 to 46 cents a share. The outlook is lower than the consensus of 49 cents.

On this, the shares have continued to fall after hours. Cisco shares are now, as of 5:02 pm ET, down more than 8 percent, or $1.55, to $17.23. Investors clearly don’t like what they see. Tomorrow looks like it’s going to be a rough day.

SAN JOSE, CA–(Marketwire -05/09/12)- Cisco (CSCO)

Q3 Net Sales: $11.6 billion (increase of 7% year over year)

Q3 Net Income: $2.2 billion GAAP (increase of 20% year over year); $2.6 billion non-GAAP (increase of 11% year over year)

Q3 Earnings per Share: $0.40 GAAP (increase of 21% year over year); $0.48 non-GAAP (increase of 14% year over year)

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 28, 2012. Cisco reported third quarter net sales of $11.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion, or $0.40 per share, and non-GAAP net income of $2.6 billion, or $0.48 per share.

“We delivered solid results this quarter with record revenue and non-GAAP earnings per share,” said John Chambers, Cisco chairman and CEO. “We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors.”

Chambers continued, “In a world of clouds, video and mobile device proliferations, the role of the intelligent network has never been greater and our value proposition with our customers is the strongest it has ever been. Our vision and strategy is focused on the right market transitions, and I want to thank our shareholders, employees, customers and partners for their ongoing commitment to Cisco.”

GAAP Results

Q3 2012 Q3 2011 Vs. Q3 2011
—————- —————- —————
Net Sales $ 11.6 billion $ 10.9 billion 6.6%
Net Income $ 2.2 billion $ 1.8 billion 19.8%
Earnings per Share $ 0.40 $ 0.33 21.2%

Non-GAAP Results

Q3 2012 Q3 2011 Vs. Q3 2011
————— ————— —————
Net Income $ 2.6 billion $ 2.3 billion 10.9%
Earnings per Share $ 0.48 $ 0.42 14.3%

Net sales for the first nine months of fiscal 2012 were $34.4 billion, compared with $32.0 billion for the first nine months of fiscal 2011. Net income for the first nine months of fiscal 2012, on a GAAP basis, was $6.1 billion, or $1.13 per share, compared with $5.3 billion, or $0.94 per share, for the first nine months of fiscal 2011. Non-GAAP net income for the first nine months of fiscal 2012 was $7.5 billion, or $1.38 per share, compared with $6.8 billion, or $1.22 per share, for the first nine months of fiscal 2011.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 5.

Cisco will discuss third quarter results and business outlook in a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Other Financial Highlights

Cash flows from operations were $3.0 billion for the third quarter of fiscal 2012, compared with $3.1 billion for the second quarter of fiscal 2012, and compared with $3.0 billion for the third quarter of fiscal 2011.

Cash and cash equivalents and investments totaled $48.4 billion at the end of the third quarter of fiscal 2012, compared with $46.7 billion at the end of the second quarter of fiscal 2012, and compared with $44.6 billion at the end of fiscal 2011.

During the third quarter of fiscal 2012, Cisco repurchased 27 million shares of common stock under its stock repurchase program at an average price of $20.28 per share for an aggregate purchase price of $550 million. As of April 28, 2012, Cisco had repurchased and retired 3.6 billion shares of Cisco common stock at an average price of $20.47 per share for an aggregate purchase price of approximately $74.3 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $7.7 billion with no termination date. During the third quarter of fiscal 2012, Cisco also paid a cash dividend of $0.08, or $432 million.

Days sales outstanding in accounts receivable (DSO) at the end of the third quarter of fiscal 2012 were 31 days, compared with 31 days at the end of the second quarter of fiscal 2012, and compared with 37 days at the end of the third quarter of fiscal 2011.

Inventory turns on a GAAP basis were 11.5 in the third quarter of fiscal 2012, compared with 11.1 in each of the second quarter of fiscal 2012 and the third quarter of fiscal 2011. Non-GAAP inventory turns were 11.1 in the third quarter of fiscal 2012, compared with 10.8 in the second quarter of fiscal 2012, and compared with 10.3 in the third quarter of fiscal 2011.

Select Global Business Highlights

Cisco announced its intent to acquire NDS Group Ltd., a provider of video software and content security solutions. The acquisition is expected to help Cisco’s ability to transform how service providers and media companies deliver next-generation video experiences to subscribers.
Cisco completed the acquisition of privately held Lightwire, Inc. Lightwire develops advanced optical interconnect technology for high-speed networking applications. The acquisition is expected to allow Cisco to deliver cost-effective, high-speed networks with the next generation of optical connectivity.
Cisco acquired privately held ClearAccess, Inc. The acquisition enhances Cisco’s network management capabilities and enables service providers to better deliver, manage and monetize their services.
Cisco announced strategic investments in Brazil to foster innovation, transformation and socio-economic development.

Cisco Innovation

Cisco announced it has updated its cloud-ready switching portfolio to enhance network virtualization with simplicity and scale.
Cisco announced a successful demonstration and validation of its coherent 100G dense wavelength division multiplexing solution, exceeding 3,000 km in reach without the need for regeneration. This distance is 50 percent farther than any non-Raman alternative solution on the market today.
Cisco introduced the industry’s first carrier-grade, end-to-end Wi-Fi infrastructure to deliver next-generation hotspots. The technology is designed to deliver seamless mobile experiences and enables operators to support a continuing expansion of mobile traffic, devices and new services.
Cisco announced innovations across the Cisco Unified Computing System® (UCS) that quadruple memory capacity, double switching capacity and simplify management for large-scale Cisco UCS® deployments.
Cisco introduced new Linksys Smart Wi-Fi Routers with app-enabled capabilities for new home experiences. The three new routers offer wireless performance and support for Cisco Connect® Cloud.
Cisco announced it expanded its small business product portfolio with new wireless access points, routers, switches, unified communications and partner-managed service offerings.
Cisco and NetApp announced FlexPod was the first data center infrastructure solution to be validated by Microsoft for the updated Microsoft Private Cloud Fast Track 2.0 program.

Select Customer Announcements

TELUS announced it has deployed key components of the Cisco Videoscape™ platform to extend its Optik TV services to mobile devices.
Cisco announced it has been chosen by Fastway Transmissions Private Ltd. to facilitate cable digitization deployment across its customer base in India. Fastway is expected to deploy more than two million next-generation digital set-top boxes from Cisco during the next two years.
Magyar Telekom rolled out 4G LTE services with Cisco mobile internet solutions. Magyar Telekom is Hungary’s largest telecommunications company.
IPLAN chose Cisco technology for its newest data center which is expected to be launched in June 2012. IPLAN is a leader in telecommunications and cloud computing services for small and medium-sized businesses in Argentina.
Videotron launched its enhanced illico digital TV service with Cisco’s HD set-top box platform. Videotron is a leading Canadian telecommunications operator providing communications and broadband entertainment services.
Peru Credit Bank implemented the Cisco Unified Communications system to increase business flexibility and reduce costs.
Kabel Deutschland (KD) selected Cisco CRS-3 routers for its Internet Protocol Next-Generation Network core to meet demand for video and broadband services. KD is Germany’s largest cable operator.
Netelligent announced that it will collaborate with Desktone, Inc. to offer cloud-hosted virtual desktops. These cloud-based solutions will include Cisco UCS, the Desktone desktops-as-a-service (DaaS) platform and NetApp storage systems.

Editor’s Note:

Q3 FY 2012 conference call to discuss Cisco’s results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, May 9, 2012. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international).
Conference call replay will be available from 4:30 p.m. Pacific Time, May 9, 2012 to 4:30 p.m. Pacific Time, May 16, 2012 at 866-493-8039 (United States) or 203-369-1749 (international). The replay also will be available via webcast from May 9, 2012 through July 20, 2012 on the Cisco Investor Relations website at http://investor.cisco.com.
Additional information regarding Cisco’s financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 9, 2012. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.

About Cisco

Cisco (CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

The two companies had asked the judge essentially to throw out the other side’s complaint and rule in their favor in a pair of dueling filings last month, and made arguments to that effect in late March. Now being heard in a California State Superior Court, the case is going to trial, with no hope for a settlement, Reuters reported.

It all started up in late 2010, when in reaching a settlement of a lawsuit concerning Mark Hurd’s taking a job as co-president of Oracle, HP asked Oracle to include some language that it argues committed it to continue to build software that would support Intel’s exotic Itanium server chip. That chip, you may remember, was, for all intents and purposes, a market failure, and HP was the only vendor worth mentioning that ever made a go of selling servers using it.

In March of last year, Oracle said it would cease developing versions of its software that would work on Itanium-based systems, and argued that Intel had plans to end manufacturing of the Itanium chip. HP was outraged, and Intel said it had no such plans. Oracle was in earnest. HP got its Itanium customers to publicly lobby Oracle to reverse the decision. It didn’t work. So HP sued Oracle last June.

The pretrial arguments have been colorful. Oracle accused HP of being sneaky when it negotiated the Hurd settlement. It later compared HP’s ongoing reliance on Itanium to the movie “Weekend At Bernie’s,” the corpse in the analogy being the Itanium chip, kept alive by HP funding. For HP, the argument is a simple one: Is there an enforceable agreement between it and Oracle, or not?

Oracle argues, among other things, that there is no such agreement in place, and even if there were, HP was, at the time of the agreement, about to hire Léo Apotheker and Ray Lane as its CEO and chairman, two people who, for various reasons, Oracle thoroughly distrusts. Also, Oracle says, for HP, the Itanium business is all about the billions in support and service fees it charges its customers, fees without which HP is “strategically screwed.” And by the way, the uncertainty around Itanium servers is starting to hurt HP for real.

(Image is of this T-shirt)

But there’s no denying the attraction of services like Amazon Web Services or Joyent or Rackspace, where you can spin up and configure a new virtual machine within minutes of figuring out that you need it. So, many companies seek to approximate the experience they would get from a public cloud provider on their own internal infrastructure.

It turns out that a start-up I had never heard of before this week is the most widely deployed platform for running these “private clouds,” and it’s not a bad business. Eucalyptus Systems essentially enables the same functionality on your own servers that you would expect from a cloud provider.

Eucalyptus said today that it has raised a $30 million Series C round of venture capital funding led by Institutional Venture Partners. Steve Harrick, general partner at IVP, will join the Eucalyptus board. Existing investors, including Benchmark Capital, BV Capital and New Enterprise Associates, are also in on the round. The funding brings Eucalyptus’ total capital raised to north of $50 million.

The company has an impressive roster of customers: Sony, Intercontinental Hotels, Raytheon, and the athletic-apparel group Puma. There are also several government customers, including the U.S. Food and Drug Administration, NASA, the U.S. Department of Agriculture and the Department of Defense.

In March, Eucalyptus signed a deal with Amazon to allow customers of both to migrate their workloads between the private and public environments. The point here is to give companies the flexibility they need to run their computing workloads in a mixed environment, or move them back and forth as needed. They could also operate them in tandem.

Key to this is a provision of the deal with Amazon that gives Eucalyptus access to Amazon’s APIs. What that means is that you can run processes on your own servers that are fully compatible with Amazon’s Simple Storage Service (S3), or its Elastic Compute cloud, known as EC2. “We’ve removed all the hurdles that might have been in the way of moving workloads,” Eucalyptus CEO Marten Mickos told me. The company has similar deals in place with Wipro Infotech in India and CETC32 in China.

HP shares surged by more than 7 percent, or $1.69, today to $25.10, mainly on a positive report on the state of its personal computer business from the market research firms Gartner and IDC.

As I noted yesterday, HP saw its share of the global market grow fractionally, according to the reckoning of Gartner, at the expense of Dell, Acer and Asus, while China-based rival Lenovo grew even more. IDC saw similar results, and both research houses were surprised to see the overall market grow in the first quarter of the year where a market decline had been expected.

That was enough to give HP shares a long-awaited jolt. So far in 2012, HP shares have fallen a little less than 3 percent, but that comes on top of the ridiculous 40 percent drop they suffered during 2011.

Much of that decline was suffered on Aug. 19, 2011, a day after the company, under then-CEO Léo Apotheker, missed its quarterly forecasts, spent $12 billion to acquire the British software firm Autonomy and floated an ill-advised plan to spin off the very PC operations that gave investors a rare moment to cheer. Looking back now, it does make for some irony, no?

To be sure, HP’s share price has had a better than average week. On days when the Dow was mostly in the red, HP has been one of the few stocks on the board showing green all week.

And frankly an uptick in the PC business, while welcome indeed, isn’t exactly going to fix HP in any fundamental way. At least not yet. PC sales were 31 percent of overall sales in 2011, and declined slightly over the prior year. And while that made HP’s Personal Systems Group the biggest business unit at HP last year — and now combined with printers it’s even bigger — profits both in PCs and in printers are seriously under attack.

The hope lies in the enterprise and in services, and maybe in the cloud. Profit margins in the enterprise business and in the services group were roughly twice what they were in PCs. HP also made a big announcement on the cloud computing front earlier this week that would seem to put it on course to compete with the likes of Amazon in providing computing capacity in a similar for-hire fashion as the Web retailer does with its Web Services unit.

It’s hard to know how profitable that business is for Amazon because it doesn’t disclose its operational size and profit margins and lumps that operation into its $1.4 billion category labeled “other.” However it’s worth noting — as HP surely has — that Amazon’s “other” category grew by 73 percent in 2011 and nearly tripled in size from 2009. There may be a real light at the end of that tunnel yet, but there’s lot’s of work to do.

One early customer is Rob Legato, the visual effects supervisor who won an Academy Award for his work on the Martin Scorsese-directed hit motion picture “Hugo.” Legato will be talking about ioFX with Fusion-io chief scientist and Apple co-founder Steve Wozniak at a conference in Las Vegas next week.

Fusion does some cool stuff with flash memory. Here’s the part where I roll out the old metaphor that has served me so well: In pretty much any computer, you can think of the processor as a fast-moving, highly efficient, type-A personality, constantly in a hurry, and always waiting impatiently for the rest of the system to give it more work to do. The slowpoke in the deal is the hard drive, which, though it’s already spinning at a super fast rate, just can’t get data to the processor fast enough. So the processor sits around, tapping its foot and looking at its watch, waiting for the other parts of the system that feed it data to work to keep up.

In high-performance computing, where there’s more data to be crunched than in most average computing situations, this is sort of a big deal. You want the processor to be as busy as possible — mainly because the systems are so expensive, and you want to get your money’s worth out of them — but also because jobs get done faster.

So Fusion-io’s stock in trade is a series of insert cards that bring flash memory right up next to the processor. The flash chips grab great big armloads of data and hold on to it, handing it off to the processor in a way that keeps it happy and busy and not impatiently waiting — at least not so much.

We’ve seen the technology brought to bear at places like Credit Suisse, which added Fusion’s flash cards to its trading systems. And its technology is also used in data centers belonging to Facebook and Apple.

On top of that, Fusion has relationships with all the big server vendors: Hewlett-Packard, IBM, Dell and SuperMicro all sell systems with Fusion-io on board.

Workstations are essentially heavily tricked-out PCs that are used primarily in two professions: Animation and special-effects work for movies and TV and computer-assisted design and modeling, used by folks who design buildings and cars and planes and pretty much anything else you can think of. They have the same problem that servers have — agitated processors constantly waiting for the rest of the system to catch up with them.

At this point, none of the workstation vendors are offering the card as an option, but if you’ve got a professional workstation — like, say, an Apple Mac Pro, which has three PCI Express slots — you might add one of these cards and speed up your work. In the meantime, the company is working with workstation vendors to get the ioFX insert cards certified. My guess is there will be more than a few visual artists who won’t bother to wait.

Fusion-io shares are up almost 11 percent — or $2.64 — to $27.30, as of 11 am ET; not so much on this news — workstations are kind of a low-volume market — but on an analyst report from Piper Jaffray suggesting that Cisco Systems may be close to a deal to add Fusion-io’s flash technology to its Unified Computing System platform.

The report goes on to suggest that Cisco could, over the next three or four quarters, become one of Fusion’s bigger customers, along with Facebook and Apple, and could account for more than 10 percent of Fusion’s business — which could, in turn, lead to a doubling of revenue this year. For the record, sales were $197.2 million in Fusion’s fiscal 2011. Do the math.

Obviously, that’s not the part that surprises me. But here is the bit that did: When you add up all those expenses over a server’s lifetime, labor costs amount to about 70 percent of the total, according to IBM. If you had asked me, I would have guessed the cost of power would outweigh the cost of ongoing labor. Silly me.

I talked with IBM’s Steve Mills about this earlier this week. He’s Big Blue’s senior vice president and group executive for Software and Systems. It’s not uncommon, he says, for a company to take weeks or even a month between a server’s arrival and its deployment.

IBM today announced a hardware system it calls PureSystems that can cut that deployment time to hours and reduce the lifetime labor cost associated with the server by about one-third.

Basically what IBM is doing here is bringing to bear its expertise in services. Having done so well running IT services for a few thousand different companies, it has learned a thing or two about efficiency.

And it makes perfect sense when you consider that much of IBM’s $107 billion in revenue is derived from its services business. Now it’s taking some of that learning and applying it to its hardware and software business, which accounts for about 40 percent of sales.

The key feature, Mills told me, is something called the Flex Systems Manager, which is some IBM-made software that automates a lot of the set-up and maintenance work that traditionally has to be done more or less manually by one or a team of IT managers. “The purpose of the code is to do discovery. … Can I locate every piece of hardware in the frame? What are the rules for configuring it? Can I locate all the software I need and what are the rules for configuring that?” Mills told me.

All that data has been gathered into a single screen that makes the relevant information available at a glance. Mills says the system can be up and running within four hours of arriving at a company’s loading dock. That’s a bold claim.

It’s all based around patterns that IBM has seen over and over again for different types of deployments and configuration options. See them often enough and you can develop software scripts that take a great deal of the manual labor out of the process.

Sometimes companies have their own unique or wonky business processes that even someone as experienced as IBM hasn’t seen before. If that’s the case, a company can craft its own pattern and translate that into software that can automate a process that’s unique to its business or internal rules.

IBM has also teamed up with 125 independent software vendors or ISVs to develop their own patterns that clients can quickly download in order to get up and running. (IBM put out a video on that, which I’ve taken the liberty of embedding below.)

It’s also pretty diverse from a computing standpoint. IBM being IBM, the system has different hardware options, including processors from Intel or its own Power line of chips. There are also three OS options: Windows, Linux and AIX, IBM’s proprietary flavor of Unix. There’s also a wide choice of virtual machine managers: VMWare, KVM, Microsoft’s HyperV and IBM’s own PowerVM.

In the end, the point is to allow a company’s employees to spend more time working on their key lines of business and less time making the computers run properly, which is at its most basic level the IT shop’s highest mission.

It’s not so much about any shifts in sentiment or intention for spending among large companies, it’s just that the dollar is currently strong against other currencies, so U.S.-domiciled companies are in a weaker position when selling to customers in other countries. When accounting for that discrepancy, Gartner says it expects overall growth in spending of 2.5 percent, but on a constant currency basis, the digits would be transposed for a healthier 5.2 percent.

Spending by governments will likely contract, thanks in no small part to the austerity measures being put in place in the euro zone.

The highest rate of growth will be in the telecommunications equipment sector, which will grow by nearly 7 percent, Gartner says. A lot of that is thanks to mobile going to mobile, but also to speeding up networks. See the rest of the segments and their expected rates of growth in the table I screengrabbed from the press release, below:

Earlier this week, Gartner singled out IT spending in emerging economies, which it said will amount to an impressive trillion and change by itself. And last week we got a glance at the sentiment from 100 CIOs at large enterprises, courtesy of J.P. Morgan, indicating that growth is likely to tick upward this year. Up is good.

Now you understand why executives at large tech companies like Intel, IBM, Hewlett-Packard and Cisco Systems get so excited when they talk about places like Brazil, India and elsewhere.

Brazil in particular is just a big part of a surging Latin American region, Gartner says, where spending will total $326 billion; nearly half of that in the professional sector, the other half in consumer.

By adding Mexico, Gartner also adds a fifth member to the four-country BRIC club comprised of Brazil, Russia, India and China. The five countries that make up the BRIMC club will account for 17 percent, or $658 billion, of IT spending this year, the firm says.

The Asia Pacific Region will account for the most among the emerging economies: $496 billion. The Middle East and Africa will account for $244 billion in spending, more than a third of that coming from Saudi Arabia, Turkey and South Africa. Central and Eastern Europe, led by Russia and followed by Poland and the Czech Republic, will account for $158 billion.

Luis Anavitarte, the Gartner analyst who led the study, says that while that seems like an awful lot of healthy spending, buyers are still cautious. He said in a statement that he expects to see aggressive efforts made to go after new consumer buyers in all of these countries, which brings to mind Apple’s aggressive retail push in China. Also, expect to see a lot of spending on cloud computing and mobile technologies at the office.

(Image taken from what someone thinks a trillion-dollar bill might look like. Of course, no such bill exists.)

She was in New York yesterday for a lunch with a few journalists, primarily to talk about Intel’s latest generation of Xeon processors for servers. Before they were officially released, these chips were known primarily by their code name, Romley, and often still are when analysts and others talk about them, because the code names are easier to remember than the product names, which, for the record in this case, is Xeon Processor E5-2600.

The Romley generation of chips builds on the foundation of Intel’s previous generation of server chips, known by its code name, Nehalem. The main benefit, which Bryant and other Intel execs and customers explain in lengthy detail in this video from the product’s launch in San Francisco three weeks ago, is that the chip is 80 percent faster at certain computing jobs, according to independent tests. At the same time, it is 50 percent more energy efficient.

Executives who operate data centers generally worry about two things: The raw number-crunching power they can squeeze out of the chips in their densely packed racks of servers, and the cost of the power required to keep them running and also keep them cool. So the introduction of a chip that can get more work done in a shorter amount of time while using half as much power is, at first glance, a pretty compelling moment to consider an upgrade.

And yet, that doesn’t seem to be the case. In a survey of 100 CIOs of large enterprises conducted by the investment bank J.P. Morgan, 91 said that they didn’t see Intel’s Romley chips as much of a catalyst for upgrades in their data center. Most seemed happy with the Nehalem-generation chips they had just purchased in servers during the past two to four years.

I was eager to share this result with Bryant to see what she said, and was too rude to wait until the salad course had arrived. For a moment, she was surprised — 91 percent is a pretty large percentage, after all. But the surprise didn’t last more than a few seconds.

Off the top of her head, Bryant rattled off the following, which I’m paraphrasing. On a recent visit with a customer who happens to be one of the 100 largest companies in the world — she wasn’t at liberty to identify it — Intel found an interesting result.

A check of the company’s data centers found that 36 percent — a little more than a third — of its servers were using chips that were more than four years old, meaning that they dated back to the dim mists of the days before Nehalem.

Those servers, it turned out, were responsible for consuming 65 percent — nearly two thirds — of its power supply. And how much computing muscle was the company getting for all this power? Precious little: The servers in question provided only 4 percent of the computing power of its infrastructure. To sum up: A third of the data center footprint was eating up two-thirds of the power budget, but providing less than one-twentieth of the overall computing capacity. Those older chips just aren’t pulling their weight.

“This is is extremely typical of what we’re seeing,” Bryant told me. Even so, she conceded that a customer running a larger percentage of more-recent chips — Nehalem and its newer variants — in its infrastructure might not see the sufficient bang for the buck of an upgrade that anyone running a lot of servers with older chips probably would.

I have to admit it was a pretty good answer.

The funding round includes strategic stakes from Toshiba, the Japanese chip and electronics maker; networking concern Juniper Networks; and funding from new investors, including Highland Capital and SAP Ventures, the investment arm of German software giant SAP.

Violin CEO Don Basile also told me today that the company is in the process of picking bankers that will likely lead it to an initial public offering before the end of 2012. “We had our final bake-off last week,” he told me, though he didn’t disclose who had won it.

That Violin was raising capital was disclosed in a filing with the US Securities and Exchange Commission. A formal announcement on the funding will come Monday.

Violin has been growing pretty aggressively in recent months. Basile told me that the company now has 320 employees, up from 50 in the last six months. It has been building up a global sales force with 40 people working in Europe and the Middle east. That team is run by Garry Veale, the former head of HP’s Storageworks operation in Europe. Earlier this month it hired Martin Darling, a former EMC sales exec to run its sales team in Asia.

Basile says the investment will be used press down on the gas pedal and keep growing, but also to look seriously at an IPO before the end of 2012. “The funding gives us the means to grow as a private company, but also to look at the public markets if the conditions are right,” he said. “It’s more likely than not that we’ll be a public company by the end of the calendar year.”

It comes in the form of a survey of 100 CIOs by the investment bank J.P. Morgan. The firm finds that, on average, CIOs say they’re going to boost their IT spending by 2.7 percent this year, up from 2.4 percent in 2011. That may not seem like a big change, but here’s why its important: It’s the first time in a few years that the same survey has detected a directional change in sentiment. CIOs are at long last saying they intend to boost their spending on IT, rather than trimming it back and back and back as they have for the last several years. “In our prior CIO survey in September 2011, the directional movement indicated a reduction in planned spending growth, as at that time CIOs were starting to pare back on spending during more uncertain macroeconomic conditions,” the firm says in its report, which was shared exclusively with AllThingsD.

The optimism is a bit more pronounced when you see it expressed in the graphic below, which I grabbed from raw survey results. More than two-thirds of the CIOs surveyed said they planned to boost their overall IT spend this year, most of them by a modest 1-5 percent, but some by more than 10 percent. Last year, the figure was 58 percent, but it usually swings up by only 3 or 4 percentage points, analyst Mark Moskowitz told me.

“The overall tone we got in our conversations with these CIOs was more optimistic than it has been in a while,” Moskowitz said. “They have the green light to start projects that are going to take several quarters to get done. Most aren’t willing to do that when they’re worried their overall business is going to roll over.” A lot of that has to do with more confidence in the overall macroeconomic environment.

And where will that growth be? And, perhaps more importantly, where won’t it be? Software, storage and security are looking like big spending priorities among the CIOs surveyed. Business intelligence tools and getting mobile devices integrated are also high on the list — there’s that ongoing trend toward “bring your own device” (BYOD), rearing its persistent head once again.

Employee-purchased iPhones, iPads and Android devices are supplanting company-assigned BlackBerrys. “BYOD is real,” Moskowitz says. “And you have to assume that Apple is going to be the one that benefits the most from it.”

Other winners include EMC and NetApp, as they play strongly in networked storage. Server virtualization — making one physical server act like dozens of servers, using software to subdivide its resources — also has a lot of room to grow, the survey finds. That’s good news for VMware.

Losers? There are few. Intel’s new Romley chip isn’t going to be as big a deal in spurring spending on new servers: In fact,91 percent of CIOs surveyed said they don’t expect Intel’s new chip to drive new spending in the data center. Intel’s last big upgrade, Nehalem, did change the game, Moskowitz says. The trouble is, most of the companies using Nehalem-generation chips in their servers are happy with them, and are unlikely to bother with the expense of an upgrade, for now.

Nor is Windows 8 going to cause a new round of PC buying, as both Hewlett-Packard and Dell are hoping. “A new version of Windows hasn’t caused a PC upgrade cycle since 1995,” Moskowitz told me. Asked directly if Windows 8 was expected to drive a major PC upgrade cycle, 78 percent of the CIOs in the survey said no. In fact, at least 30 of the CIOs in the survey said they were still working on deploying Windows 7. Ouch. Perhaps it’s too much to ask for things to be looking up for everyone all at once.

(Image is a movie poster for the 1935 British film starring Cicely Courtneidge, but the title song in this case is, well, awful. What I really wanted was an image of Fred Astaire dancing with Joan Fontaine to the underappreciated George and Ira Gershwin tune of the same name, from the 1937 film “A Damsel in Distress,” but I could find nothing suitable. So — loving Gershwin tunes as I do — just for fun, I’ve embedded both Astaire and Billie Holiday singing the tune, below, courtesy of Grooveshark. Yes, I’ll admit, sometimes I have a little too much fun in this job.)

Narayan Venkat has joined Violin as VP of product management. He spent just a bit more than a year at VMware, where he led its storage initiatives. His resume includes time at chip companies including LSI and Intel.

At Violin, he’ll be in charge of pushing Violin’s flash technology into the data center. As I told you last summer, when Violin raised $40 million from Toshiba and Juniper Networks and several individuals, its flash arrays run faster than old-school storage arrays, while reducing both the physical footprint needed for the hardware and the power consumption. Hewlett-Packard resells its gear, and AOL is a big customer.

“Flash is the biggest disruption in the data center to come along in years,” Venkat told me. Violin’s last big hire was its CTO, Jonathan Goldick, who also came from LSI.

Now, there are lots of X-as-a-service plays in the IT world, and one of them is the desktop-as-a-service approach, where everything you need for a workaday PC can run on a virtualized server in the cloud, and all the user sees is a keyboard, mouse and screen. It’s efficient, easier and less costly to support than desktop PCs. But? You need to fully license every instance of software you use, in much the same way you would with an old-school desktop. And then there’s always the latency that comes from delivering something via the pipes, which are never quite fast enough, no matter what you do.

But what if you could deliver a full computing experience — operating systems, applications, gaming, the whole enchilada — virtually? Two weeks ago, I saw a demonstration of just such a service that kind of blew my mind. And today the company behind it, Numecent, is coming out of stealth mode and also announcing a spinoff.

First, let’s cover the basics: Numecent is a start-up run by Osman Kent, the onetime CEO and co-founder of 3Dlabs, the company that in the 1990s more or less started the graphics processor industry, which Nvidia and Advanced Micro Devices are the leaders of today. The company has a bunch of undisclosed investors, but last month TechCrunch reported that it had raised $2 million in a series A that was part of a larger $10 million funding round. I’m told there are 107 individual shareholders in the company.

So what does Numecent’s Technology do? It calls its technology “cloud paging,” and in its corporate literature it takes pains to explain that it is nothing like “pixel streaming,” a technique in which applications, mostly games, run on a cloud server and deliver the experience of the game — literally the pixels of a gaming environment — to a PC over the Internet. This is essentially how OnLive, a gaming outfit, works.

The fundamental problem here is that while the cloud is good for streaming linear content like movies and music, where one bit follows logically after another, it’s less good at nonlinear stuff, like applications. One bit doesn’t necessarily follow in a logical order from another, because users jump around from one process or feature to another. So if you’re trying to run a software application via the cloud, you can run into trouble pretty easily if it’s a processor-heavy program.

Cloud paging, as best I understand it, uses the Internet to transmit x86 chip instructions — basically telling the Intel or AMD processor in a PC what to do remotely. What this allows is something Numecent describes as “friction-free” computing. What that means in practice is that you could run any application on your local system from the cloud, in an almost-instant, on-demand manner. And when you’re done using it you just shut it down and your local system is left more or less untouched. When you’re done using it, it’s as if the software had never been on your PC.

Numecent’s cloud-paging scheme breaks software up into small pieces, called “pages,” that can then be pushed out dynamically. The user’s machine creates what’s called a virtual memory management unit, which handles the job of requesting the pages that are delivered. Connections between the client machine and the server are also strongly encrypted.

The end result, the company says, is a reduction by as much as 60x in deployment and delivery time of applications. And there’s also nothing to maintain. When the user is done using the virtual application or machine, there’s nothing left on the client machine.

Let’s say you’re a part-time graphic designer who works for a company only two days a week. The company would normally have to pay for you to have Adobe Creative Suite installed on the machine you use. This can easily run a few thousand dollars. But if you could check it out for a few hours and run it on a cloud server, with the same features and the same native speed, as though it were installed on your local system, it would cost your employer a lot less.

Central to all this are 10 patents that Numecent has on its cloud-paging technology. I’m told that these are battle-tested patents, and that Microsoft and Citrix Systems are among its licensees.

The same experience can be applied to games. Most games worth having can be bought from download stores today, but they’re huge and take a lot of time to download and then install. What if you could just play whatever game you wanted, pay for the time you use it, and then stop paying when you’re done? That’s sort of the idea behind Approxy, a spinoff that Numecent is launching today, as well. Yavuz Ahiska, another 3Dlabs alum, is taking it out of Numecent, and plans to offer a white-labeled cloud gaming service that gaming companies can license. Approxy is described in a lot more detail in the video (below) that Numecent shared with me exclusively.

Numecent’s plan is to essentially spin out different companies that put its cloud-paging technology to work in different contexts.

Approxy from Arik Hesseldahl on Vimeo.

On Monday, the company is officially taking the wraps off its plans. Nicira — which I’m told is pronounced like “nice era” — aims to be the vendor of a new networking technology that’s built specifically for the age of cloud computing.

One of the most important enabling technologies of the age of the cloud is something called “virtualization”: As computers have gotten more powerful, thanks mainly to the progress of Moore’s law and ever-better chips — a single computer can, with the aid of software like that created by VMware, act like it’s 10 or 20 or 40 different computers, all at once. Each “virtual machine” has, to its user, all the properties of a physical computer, and ensures that a single machine is used in the most efficient and cost-effective way possible. Customers who use cloud services can quickly “spin up” new virtual machines as needed to meet new demands, usually within minutes.

But generally speaking, networking hasn’t kept up. The pipes through which bits pour in and out of data centers have gotten faster, but they haven’t gotten much smarter. Where cloud servers are flexible, precise and easy to manage, networks are, by comparison, blunt instruments. Meeting new demand means adding new capacity, and that usually means adding new hardware to the mix, and that usually takes weeks, if not longer.

If you’ve ever wondered if it were possible to “spin up” a virtual network as readily as you do a virtual machine, wonder no more, for that is precisely what Nicira wants to offer you, without the addition of a single new piece of hardware, but rather only some software that runs on your existing server. You don’t even need to have especially advanced networking hardware.

Its the kind of thing that could give big enterprises some new flexibility in managing their network infrastructure, particularly as need and demand peaks and drops, whether by the day or because of a seasonal change that happens just once a year.

The company already has customers: AT&T, eBay, Fidelity Investments, Rackspace and the Japanese telecom giant NTT are all using Nicira, the company says.

Nicira calls its product an NVP, or network virtualization platform, and it is being described as the sort of advance that comes along perhaps once every quarter-century. That’s a bold claim, but the argument on which the company is making it holds water. On a day-to-day basis, where you deploy an application in a data center is as much a function of how much networking capacity you have available as it is one of computing capacity.

Virtualization on servers allows you to spread a single app over as many physical machines as needed, but the network connecting those machines is what it is, and if it isn’t up to snuff, you can either enhance it by adding new routers and switches, or live with it. The result is that you can’t be as flexible with deploying apps as you’d like, and that certain machines end up being underutilized by as much as one-third, which is costly over time. You end up having to buy more servers, then pay to run them and cool them.

The Nicira NVP, as CEO Stephen Mullaney told me, “decouples” a virtual network from the physical network hardware. “All of the intelligence, all of the control, all of the services now get done in the virtual space.” The result, what was once a dumb networking pipe carrying bits into two different virtual machines running on the same one, can now be programmed to act in vastly different manners, according to rules in the virtual realm. In much the same way a single computer gets turned into a dozen, a single network can be subdivided and act like a dozen individual networks. Or the reverse: Several networks can be cobbled together to act like one. And a virtual network can be created on the fly in minutes, just like a virtual machine.

A network you can deploy in minutes saves a lot of money, because it allows you to move quickly as your networking needs change. Most big companies who demand the heaviest network loads have agreements with their service providers — usually big telecom companies — that a request for new capacity requires a week or more, because it requires the physical presence of technicians who have to install and provision new gear. But what if you can reconfigure your network in 30 seconds to meet the needs of some new application? That’s exactly what eBay’s Cloud Architect JC Martin found he could do after installing Nicira’s software on the company’s servers. EBay is a Nicira reference customer.

Other reference customers had other interesting experiences and uses to report. Japan’s NTT uses cloud data centers to run some 10,000 virtual desktops — think PCs that are all virtual machines — and found that it was easier to quickly switch between data centers during the rolling blackouts that have become the norm since that country’s earthquake last year.

There is, of course, a great deal more technical detail, but the point you have to get is that this company is out to disrupt the networking industry in a way that it hasn’t been disrupted in a long time. The traditional solution to networking problems is more, better, faster hardware, and companies like Cisco, Juniper, and Hewlett-Packard, among others, are constantly on the lookout for opportunities to sell more of that hardware.

But what if you could look a sales rep from one of those companies in the eye, and tell them that their latest million-dollar router or switch isn’t needed? Once upon a time, before the days of virtualization, if you needed a new server, you had to buy one and have it installed somewhere. Now you can, in most cases, rent space on one within minutes, or literally provision another with a few clicks of a mouse. It changed the expectation and much of the calculus of the IT industry. Many companies never buy their own servers at all, and rent space from cloud providers like Amazon, Rackspace and Joyent.

Exactly what a similar disruption might mean for networking vendors is a little hard to imagine, but if the folks at Nicira are right about the potential this technology of theirs has, it looks like that disruption is coming, one way or another.

Shares are down more than $4, or about 13 percent. The freakout appears to be coming from gross margins that shrank to 51 percent from almost 59 percent in the prior quarter, and despite the fact that sales more than doubled sequentially to $84 million from $31 million before.

CEO David Flynn called me up a little while ago to talk about the results, and he reminded me that Fusion launched its new IO Drive 2. It’s a transition to a new product line that’s proving tricky. New products built on new technologies are always a little more costly to build up front, and that’s compounded by the fact that early adopters, when they buy the new stuff, take the lower-end version and not the more expensive and more profitable one.

Also, enterprise customers who buy the new stuff are always conservative and take longer to decide whether they want to buy it or not, he says. Even so, the company has sold 10,000 of the new drives.

But? There’s a new customer of record: Salesforce.com is now a Fusion-io customer, and has joined the likes of Apple and Facebook, which is using the flash-based chips in the servers running in its data centers around the world.

And Salesforce isn’t buying it directly from Fusion, but rather through one its OEM partners, which include Hewlett-Packard, IBM and Dell, though Flynn wouldn’t tell me which one it is.

Salesforce is one of six customers who bought more than a million dollars worth of Fusion’s stuff this quarter and of those, four were repeat customers, Flynn told me.

The Salesforce win is also important, Flynn says, because some have wondered whether Fusion’s technology, while popular with high-end enterprises like banks and Facebook, would make sense for applications that tend to be used in mid-tier businesses, which Salesforce’s mainline CRM application often is. The lower end of the enterprise software market is moving toward cloud-based software, which is often referred to as Software as a Service, or SAAS. “By helping those companies, we are indirectly driving business in the mid-range of the market. Apple and Facebook are in the SAAS business too, it’s just that their customers are consumers.”

One interesting fact that Flynn shared with me: His first job out of college was working for Oracle. His boss at the time? One-time Oracle exec and now Salesforce CEO Marc Benioff. A small world it is, indeed.

The deal also is seen benefiting Intel’s data-center operations, where revenue jumped 17 percent in 2011 and topped $10 billion for the first time. Kirk Skaugen, general manager of Intel’s data center and connected system group, said the technology will “bring increased options” to the company’s data-center customers.

Read the rest of this post on the original site »

Veghte joined HP in 2010 after 20 years at Microsoft, where he managed the $15 billion Windows business and oversaw the launch of Windows 7. At HP, he has been credited with growing its software revenue by 18 percent last year.

Given Veghte’s history as a software guy, his appointment to this role can’t help but be seen as a key signal by CEO Meg Whitman of the role she sees software playing in HP’s strategy going forward. That was one of the things I asked Veghte about when we spoke by phone earlier this week.

AllThingsD: What, in your view, is the role of the chief strategy officer at HP, and what do you expect it to entail in the coming year?

Bill Veghte: As we’re out talking to customers, they’d like to buy more from HP; they’d like HP to be more successful. They look at the advances we’re making in networking or storage or printers, but they want to know why the whole is greater than the sum of is parts. What is HP’s strategy for continued leadership in the market transitions that are going on? And some customers would say that where HP is concerned, that’s not a fully realized opportunity.

And you’re coming at it from the software part of the business, and we’ve heard from Meg saying she’d like to grow opportunities in software. Your appointment, to me, sends a bit of a signal that software is going to be a big part of HP’s strategy to get things turned around. Is that accurate?

I think, certainly, as I talk to Meg and Ray [Lane, HP chairman], and with the members of the executive committee, I’ve found that this is a catalyzing role. If done right, there are different models of strategy in different Fortune 500 companies. And the one that makes sense here is catalyzing with other business units. Whether that’s Vijay Joshi in printing and imaging, or with Todd Bradley in PCs, or John Visentin in the enterprise group, there’s a strategy that each one of those is trying, and which is accretive to a whole that is greater than the sum of the parts. And so, to the extent that software is glue or networking is glue, I think it’s a statement that has more to do with a pan-HP strategy than something that’s specific to software.

What’s Job One, starting on your first day?

Job One is making sure that as we have those conversations with customers, they see an HP that is unified around a set of constructs and offerings that deliver what they need. It’s different from having offerings that are, by themselves, individually great. It’s about having unifying themes and constructs.

It seems that you’re talking about finding a way to routinely and thoughtfully combine different things that HP makes or does, in ways they aren’t being done now. Is that what you’re getting at?

I think that very accurately characterizes the opportunity. When we talk to the leadership team, we hear a lot of the same thing. There is a lot of great stuff within HP, whether you get that in terms of market position, or IP, or people. I like how you put that: How do you routinely and thoughtfully combine things, particularly in light of the market inflections that are happening. We are in a tectonic shift, and that can be an opportunity, if you clearly spell out the value proposition for customers. Not only in each one of the units, but where you’re thoughtfully combining them so that the whole is greater than the sum of its parts.

I thought of an example around meeting the needs of the market. There was an IHS iSuppli report out earlier this week about cloud servers, which are growing. But customers are going to Taiwanese ODM companies to get customized products, while at the same time cloud servers are growing generally. Is this the sort of thing that might affect HP?

I was talking to Dave Donatelli [general manager of Enterprise Servers] about this recently. It’s interesting, because it seems like in more recent months it has flipped back, because of the integration within that customization. A great example that Dave and I have been working on is the whole cloud system piece. You’ve got a lot of great stuff in automation and orchestration software that is inherently cross-platform, and which crosses virtualization engines and marrying that deeply with the converged infrastructure. We’re the only company that can give you a single stack, soup to nuts, from a single vendor. The core construct is that there’s a lot of private cloud build-out going on, and those customers who are doing it are saying they don’t want to be the systems integrator for six different vendors, and they also prefer not to be locked in to a single vertical stack. That’s a huge advantage for us. And to your point about routinely and thoughtfully combining, we should do exactly that. It’s been doing well for us in the marketplace, but how do you make that routine against the opportunities we see in the marketplace?

You spent about 20 years at Microsoft. How does that inform what you’re bringing to this job?

At the core, any of these jobs are about identifying and exploiting market shifts for customers. I had the privilege of having a front-row seat during some big marketplace disruptions, and helping catalyze businesses and delivering superior market positions and solutions. It’s all about handling change, and turning it into an opportunity.

In 2011, it crossed the threshold of $50 billion in annual sales for the first time, having hit the $40 billion mark only last year. This came after a tough year — 2009 — during which sales declined a bit to $35 billion, down from $37 billion in 2008. But the larger point is clear: Intel continues to be a significant growth machine in a tech ecosystem that is supposed to be on the decline.

Who says so? “The experts.” Earlier this month, Gartner and IDC both reported what they described as the second-worst year for PC sales growth in recorded history, second only to the doldrums of 2001, when the world was beset by the dotcom crash, the onset of the global war on terror and general recession, all in one. This came after the same two outfits made similarly depressing predictions for worldwide IT spending.

Intel’s results tell a different story. Consider its strengths: Sales in its data-center group — chips being sold to companies building servers that will be used to power data and applications running on the Internet — grew 17 percent year on year to north of $10 billion. And the lowly PC? The machine that is said to be on the decline by so many people who claim to know what’s going on? Sales in Intel’s PC client group grew by more than $5 billion year on year to north of $35 billion.

How can that be possible? It’s an argument that Intel has been making for some time now, and is now becoming familiar: Persistent strength in emerging markets. As Intel CEO Paul Otellini said on a conference call with analysts today, emerging markets, where household incomes are improving to the point that consumers are able to buy their first PCs, are accounting for two out of every three units of incremental microprocessor demand. Which means that for every three chips of new growth sold in a year, two are sold in an emerging market.

PC sales in China, by Intel’s reckoning, grew 15 percent, and as yet have only achieved a household penetration rate of 35 percent, which says there’s lots of room still to grow. By comparison, the U.S. market is 90 percent penetrated, meaning nearly everyone who wants a PC has one. India grew 22 percent; Indonesia, 37 percent.

Here’s another really interesting metric that should give you some food for thought: In 2012, Intel will spend $12.5 billion on capital expenditures. That’s more than twice what it spent last year. What is it spending so lavishly on? Four new chip factories — in Oregon, Arizona, China and Israel — which, when completed, will turn out chips built on the very latest, edge-of-reality technology, where chips have transistors and other elements on them that are at the 14-nanometer scale.

How small is 14 nanometers? About one-fifth the size of a typical virus cell, and only slightly bigger than the thickness of the cell wall of a typical germ. Next year, there will be four factories, employing thousands of people, turning out thousands — and later millions — of these miniscule fragments of silicon that arguably constitute some of the most complex implements mankind has ever built.

And Intel does this profitably, which is so difficult and requires such financial scale that most companies that make other kinds of chips long ago gave up running their own factories and farmed the work of actually building them to other companies. Intel is so good at it that its gross margins in 2011 were 62.5 percent. Its full profit for the year was nearly $13 billion on $54 billion in sales.

Yes, we beat on Intel for not having conquered the smartphone industry or the tablet industry as readily as it spent the 1990s bending the PC industry to its will. There is a school of thought that says Intel is less relevant today than it was, say, five years ago, and that its anemic presence in the future of personal computing — smartphones and tablets — is all the evidence one needs to render that judgement. In fairness, smartphones and tablets are still on the rise, and Intel is starting to show some promising progress, though its competition and an industry-wide preference for chips based on the ARM architecture will be difficult to dislodge.

Still, it’s a little hard to find much fault with Intel, when the numbers so clearly demonstrate that, despite the conventional wisdom, it is clearly at the height of its powers.

Apple isn’t commenting and is officially treating all this as rumor and speculation (it rarely comments on acquisitions, anyway). But the deal is being reported in Israeli newspapers, and the office of Israeli Prime Minister Benjamin Netanyahu tweeted a welcome message to Apple today, which sure feels like confirmation. So I’ll proceed under the assumption that the reports of this acquisition are true.

Welcome to Israel, Apple Inc. on your 1st acquisition here. I’m certain that you’ll benefit from the fruit of the Israeli knowledge.

December 20, 2011 3:55 am via webReplyRetweetFavorite

@IsraeliPM

The PM of Israel

That makes this a cause for celebration. With the Anobit buy, Apple is now the latest member of the Flash Madness Club, which I created over the summer, in the wake of the Fusion-io IPO and other activities by notable flash-technology companies like Violin Memory, Pure Storage and Qwilt.

So why is Apple willing to throw down a reported half-billion dollars on this company? It’s because flash memory has a fundamental problem: As it ages, its ability to store data wears off. This problem is sometimes compared to the semiconductor equivalent of Alzheimer’s. Individual cells on the flash-memory chip lose their ability to store the individual ones and zeros that make up the pictures and music and other data they may be storing, especially after millions of read-and-write operations — the act of putting data on the chip and then loading it from the chip for use. After a lot of heavy use — this can vary depending on the chip — the chips begin to suffer problems with “endurance.”

As flash starts to show up in data centers and PCs and other places beyond consumer gear like iPhones and iPads, this becomes a more important problem. If your iPad gets old enough to suffer data-endurance problems, it’s a pretty simple matter to replace it. But in the more rigorous world of an enterprise data center, where millions of reads and writes will be done on a chip daily, data endurance is a potentially very expensive problem. In the enterprise, a solid-state drive is considered suitable only if it can stand up to five full-drive write cycles, where the drive is filled to capacity and then erased every day for five years.

Anobit’s solution to these problems involves techniques known as memory-signal processing and the use of some secret-sauce memory-processing error-correction algorithms, plus some management tricks for moving data around a flash chip in more efficient ways, in order to make them last longer.

It’s also the sort of problem that a company like Apple — which is the world’s largest consumer of flash memory, and has been for several years — would want to solve. Think of the many places where Apple uses flash — the iPad, iPhone, iPod, MacBook Air and Apple TV. And those are just the products we know about, so far. Flash can’t help but appear in many more products.

On top of that, flash technology plays a significant role in Apple’s data centers. Fusion-io, the company that builds flash-based insert cards that speed up garden-variety servers, has named Apple as a significant customer, so there’s plenty of flash inside Apple’s facilities in North Carolina. Flash endurance can’t help but be a problem Apple might face with its iCloud service, for example.

Israel has a big connection to the flash industry. SanDisk’s founder, Eli Harari, is Israeli; a few years back SanDisk acquired an Israeli company called Msystems, which, if my memory serves, was the first to popularize what we now call a thumb or keychain drive. So, historically, there have been a lot of useful innovations on flash memory that have come out of that country. Supposedly, the deal calls for Apple to open a research center there, so it will get the benefit of ongoing innovations on flash. Chances are it’s going to need a few.

Today, Cisco finally laid out a cohesive strategy to become a significant player in the cloud business. It announced an offering called CloudVerse that combines three big elements — its Unified Data Center, Cloud Intelligent Network and Cloud Applications — into a big portfolio aimed at companies building out their data centers.

The idea is basically this: If you want to build a cloud, either to resell cloud services of some kind or for your company’s own internal operations, Cisco wants to talk to you. Under the CloudVerse tent are a bunch of offerings including computing, networking, collaboration and software for automating and managing it all.

Cisco named a handful of companies who are already CloudVerse customers, and a few will catch your eye, because they’re big. One is Terremark, the Web-hosting and cloud-services outfit that telecom giant Verizon acquired earlier this year. Others include Telecom Italia, Telefonica Spain and Fujitsu.

Naturally, Cisco is hoping to use its position as the supplier of choice for networking gear as a springboard into selling more stuff inside the data center, and it already has key relationships with many a corporate CIO. A key part of its go-to-market strategy will be convincing those CIOs that it has something unique to offer.

Here’s one such thing: The Network Positioning System and Cloud-to-Cloud connected. Imagine you have a sprawling set of far-flung data centers around the globe. When one center gets starts to get close to reaching its capacity load — maybe it’s Cyber Monday or something — Cisco’s NPS technology allows the routers in one data center to start automatically looking around for capacity elsewhere, to keep things humming along.

There’s a lot more detail to it, but it’s worth pointing out that, as a percentage of Cisco’s business, the cloud business isn’t huge. On an earnings conference call with analysts last month, CEO John Chambers said that the Unified Computing System that forms the backbone of its server business had recorded 116 percent revenue growth year over year; even with that, it’s on run-rate to being a $1 billion annualized business. If it hits that mark in Cisco’s fiscal year 2012, which ends in July, it will amount to about 2 percent of estimated annual sales.

But Cisco expects the cloud business opportunity to grow like crazy. Last week, it issued something called the Cisco Cloud Index, which estimates that more than half of all computing workloads will be running in data centers by 2014, and that the daily traffic conducted on cloud services of various types will amount to 1.6 zettabytes per year. My math may be off a bit, but compare it to the scale of your average hard drive — a zettabyte amounts to a billion terabytes, or a trillion gigabytes. Cisco describes it as enough data to amount to four days of high-quality video streaming for every person on Earth.

It’s a serious opportunity, no doubt. The question is whether or not Cisco can exploit it in a manner that moves the needle. Doing so is an important part of the strategy that Chambers set forth as part of the epic restructuring that has been going on at Cisco since last year. Investors seem to like what they see, as Cisco shares are trading at $18.80 today, which is up 41 percent from a recent 52-week low. As turnarounds go, it does look like progress.

Fusion-io shares closed at $38.10 — up 9.17 percent — during the regular session, and continued to climb by an additional 1 percent in after-hours trading. The shares have increased by more than 100 percent since they debuted on the New York Stock Exchange at $19 early this summer.

The main news came in the form of a new product, and the publication of news that Fusion-io technology was used in a high-performance computing project at the Lawrence Livermore National Lab.

People tend to think of Fusion-io as building traditional storage, but its main mission is to get data closer to the processor in a server, so that that processor doesn’t have to sit around waiting. Processors are super speedy and super impatient. Think of the processor as the impatient Miranda Priestly — played by Meryl Streep in “The Devil Wears Prada” — and how Anne Hathaway’s character, Andy Sachs, is never fast enough for Priestly about handing her something she needs right away. Microprocessors hate nothing more than waiting for a hard drive to serve up the data they need.

Fusion-io’s drives try to speed that process up — and make microprocessors happier — by using flash memory built into an insert card and installing it close to the processor in a system. The news, announced at the Supercomputing conference in Seattle today, is that Fusion-io debuted a 10 terabyte version of its high-end ioDrive Octal product. You can now pack four of these into a single server, and have 40 terabytes of data right up close to those impatient processors. Companies like Hewlett-Packard, IBM, Dell and Supermicro build Fusion-io’s products into their own products.

The other news also had a supercomputing wrinkle to it. A machine that Lawrence Livermore called “Leviathan,” packed with Fusion-io cards and Intel processors, broke a record in processing a graph with more than 68 billion nodes. Well, it didn’t just break the record, it shattered it, as that number of nodes in a graph is four times the prior record. What that means, in English, is that the computer plotted a mathematical graph with more than 68 billion points of data.

Apparently — and I’m just learning this now — there’s a separate version of the Top 500 list called the Graph 500 which focuses on simulating 3-D problems.

It’s a lot to take in, but the main point is that Fusion-io seems to be showing that it has a going business. Critics of the company have argued that it relies too heavily upon its biggest data-center customers like Facebook and Apple, and that it will be vulnerable to slowing sales when those companies are through building their infrastructure. The problem with that argument is that there’s always another impatient processor throwing an impatient diva fit while waiting for data.

Also, I should note that today’s 9 percent move comes after Fusion shares fell about the same amount on word last week that the company is planning a $350 million secondary offering. When investors heard about that last week, they sent the shares plunging by more than 8 percent, territory it has since reclaimed. It has been a bumpy, volatile ride for Fusion-io, no doubt. In the five months since the debut, the stock has traded as low as $15, and almost as high as $40. That’s IPO investing for you.