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Q: Nick Lippis: I made the assertion in Lippis Report Volume 45 ProCurve Networking by HP Enters Trusted Networks and WAN Routing Markets that Carly Fiorina had restricted the ProCurve Networking by HP business because of HP´s relationship with Cisco. The last time we met you disagreed with me on that assertion. How does ProCurve Networking by HP balance a tricky relationship with its corporate parent, HP, who has a deep and successful business relationship with one of your largest competitors?

A: John McHugh: Truly, there´s no ?¬¢‚Äö√ᬮ?√¨balancing" to be done. HP is committed to ProCurve, investing in the business to ensure that we continue meeting customer needs. As a result of this commitment, ProCurve continues to execute on our robust and comprehensive business model. We have secured the number-two market position worldwide and are now viewed by leading industry analysts as the premier challenger to Cisco. To meet the needs of a wide range of customers in the commercial networking area, HP invests directly in the ProCurve Networking business and also partners with Cisco. HP´s Cisco alliance allows HP to provide services and consulting to address complex, proprietary, end-to-end solutions in the most challenging of business environments. For our part, ProCurve partners with both the HP Services organization and the channel to deliver a wide
range of service and support offerings. While one can speculate on the potential of other business models being adopted by HP,
the fact is that since Ms. Fiorina structured ProCurve to focus on open market competitiveness, the business unit has taken more market share, grown larger and become more profitable than it did during the previous 15 years of HP investment in enterprise
networking.

Q: Nick Lippis: How will convergence change the networking industry and the ProCurve Networking by HP group over the next several years?

A: John McHugh: ProCurve has long understood that the industry is headed toward convergence, and as part of our focus we have been working to help drive it and shape it. It´s a fundamental part of the Adaptive EDGE Architecture and we already have products and solutions that address convergence and are convergence-ready. As for how convergence will change the networking industry, there´s a way to go before the industry at large is ready for convergence. A big part of that readiness revolves around
industry standards. Through key roles in industry standards communities, ProCurve is helping to lead and drive the key standards that will be important for convergence over the next several years. Our strategy is to have an infrastructure that supports customer demands. For instance, Voice over Internet Protocol (VoIP) is a big part of the convergence boom, and our Adaptive EDGE Architecture infrastructure can be used with any phone product and VoIP service. In addition to standards leadership, ProCurve also invests in software and management tools that support convergence. The intelligent edge strategy takes the approach that a
network needs to understand what kind of device is connecting to it and behave accordingly. For example, if it´s a phone for VoIP, the network needs to automatically provide QoS. Through our ProCurve Manager and Identity Driven Management software, we provide easy-to-use management tools to make it simple to manage and ultimately get the most from converged networks.

Q: Nick Lippis: What are the two largest change agents you see altering the network infrastructure market place?

A: John McHugh: We actually see three major change agents that are equally important and that are inseparable from one another. The first one is openness driven by the Internet, and the need to make resources available to more people. This point immediately gives rise to serious security issues that must be addressed. The second is mobility, making the network available whenever and wherever people want to connect. Mobility also leads to the need for new security solutions. Finally, as we have discussed, is convergence. Organizations and network administrators don´t want the hassle and expense of running multiple networks for voice, data, video, etc. They want the efficiency that comes with converged, multi-service networks. These three factors ?¬¢‚Äö√ᬮ‚Äö√Ñ√∫ security, mobility and convergence ?¬¢‚Äö√ᬮ‚Äö√Ñ√∫ necessitate a new set of capabilities for enterprise networking customers. Ubiquitous access implies that the network infrastructure must be inherently secure and able to be cost-effectively managed in this secure mode. Security must be assured at traditional points such as WAN access and WLAN access, and it also must be consistently deployed at wired points throughout the network. Similarly, mobility must be an easily accommodated overlay to the network so that everything from convenience mobility to mission-critical comprehensive mobility is equally easy to deploy. Finally, all of these constructs must support the diversity of traffic that IP networks will be dealing with, including voice, video, storage, bulk data and industrial automation. The only way yet introduced to achieve these lofty objectives in a cost-effective manner is ProCurve´s Adaptive EDGE Architecture. ProCurve offers an unparalleled value proposition, providing advanced technology at
affordable prices and delivering industry standards-based solutions, reduced complexity and industry-leading warranties. The ProCurve Networking Adaptive EDGE Architecture delivers comprehensive solutions to deliver secure, mobile, converged networks.
We believe that our approach enables customers to create a single secure, mobile and converged network rather than a ?¢‚Ǩ?ìnetwork of networks."

Q: Nick Lippis: Where do you see market growth for ProCurve Networking by HP?

A: John McHugh: I think it´s important to start with a perspective of where we´ve come from. First, let´s look at ProCurve´s recent market growth. According to estimates from Dell´Oro Group, ProCurve´s business has grown 25% year over year for the past three years. ProCurve is number two in port market share, based on Q2 2005 numbers from Dell´Oro. Dell´Oro also reports that we
are number three in revenue share and that we were 40% ahead of 3Com and more than 50% ahead of Extreme in the second quarter of 2005. So we are capturing solid market share from our competitors. This growth points to tremendous opportunities for ProCurve. Our value proposition resonates well with customers. Clearly, customers want open standards-based, more manageable solutions that offer proven reliability, trusted security and price/performance leadership. Our market growth will come from our continued focus and execution. Our growth will also come from our continued innovations, reinvestments and our passion to compete and grow our customer base. Specifically, we plan to expand up in the market, into larger enterprise accounts and a more complete solutions-oriented space. Geographically, we will continue our domestic growth while increasing our presence internationally, especially in fast-growing Asian markets, notably China and Japan.

Q: Nick Lippis: Is there enough growth in Ethernet switching for the 10 major players or will this consolidate to 3 in short order?

A: John McHugh: Of course, there has already been some consolidation in the marketplace, and that will continue. Customers´ focus on stability, vision and high-quality support from their networking suppliers has made it difficult for some of our competitors to maintain their market share over the past several years. Customers buying networking infrastructure are thinking about the long term and don´t want to make a decision they will regret in three to five years. The companies that are succeeding today and that will continue to succeed in the future are those creating meaningful contributions, painting compelling visions of the future and giving customers predictable and cost-effective solutions. ProCurve is established as a strong number two in this market.
One thing I´d like to address here is the implication some people are making about the limited potential of the Ethernet switching market. We´ve heard talk recently that the Ethernet switch market is commoditizing. In fact, we strongly dispute that contention. This market is still changing and evolving, and a prime example is our own success at pushing intelligence to the edge of the network. This move of intelligence to the edge proves that Ethernet switching is not a commodity. ProCurve understands this evolution and we´re ahead of it. The vendors who currently attack the market with commodity offerings will continue to remain niche players because they are not in a position to give customers the kind of network solutions that will be needed in the
future.

Q: Nick Lippis: The ProCurve Networking by HP group has been systematically increasing its product portfolio to address the mid to large enterprise market. The 9408sl routing switch for the core enterprise LAN market just became available this Aug 1st, while the 7000sl branch router marked ProCurve Networking by HP´s re-entry into the router market. What is your large enterprise entry strategy?

A: John McHugh: We have been in the enterprise market for some time, with large-enterprise customers including General Mills, Allied Tube & Conduit and Frontier Airlines to name a few. And we introduced our first ProCurve Networking Routing Switch 9300m series more than five years ago. So instead of speaking about our ?¢‚Ǩ?ìentry" strategy, let me talk for a minute about our
overall strategy for large enterprises. ProCurve´s charter is to deliver solutions that address CIOs´ hot buttons, with a strong
sensitivity to investment protection. As you know, our core strategy is a mainstream strategy: to deliver the products and services that meet the mainstream requirements (as opposed to niche requirements) of our customers. What this means is that we will not try to sell our customers on end-to-end proprietary solutions that lock them into a networking operating system, limit their ability to choose best-in-class solutions and force them to pay premium prices because of single-vendor limitations. As part of that strategy, we continue to invest heavily in R&D and round out our product portfolio, including new and improved routing switches, interconnect fabrics, management software (notably the ProCurve Identity Driven Manager [IDM]) and routers, which help
deliver the edge-to-edge solution that many of our customers, particularly large enterprises, want and need.

Q: Nick Lippis: The ProCurve Network by HP group and Foundry Networks have increased their relationship over the past six months. How might we see ProCurve and Foundry working together over the next business cycle?

A: John McHugh: Foundry Networks continues to be an important development partner for ProCurve. Foundry is one of a number of companies with whom ProCurve has a relationship, and we continue to leverage their expertise in the routing switch area to enable us to deliver products that our customers demand. It´s important to note that if a Foundry box goes out the door from ProCurve it goes out as a ProCurve product, with proven reliability backed by the industry-leading warranties and exceptional service and support that all our products receive. From our customers´ perspective, these are ProCurve products through and through. We see it as a wise use of our resources to take advantage of specific expertise from partners, which enables us to
focus our own R&D on our core technology strengths.

Q: Nick Lippis: When will the Riverstone Networks’ enterprise assets materialize in the form of ProCurve networking products?

A: John McHugh: I´m delighted to report that the technologies we acquired from Riverstone Networks were sed to develop our ProCurve Interconnect Fabric Switch 8100fl family, which is the first step in delivering an InterConnect Fabric (ICF) solution. The ICF will be announced on September 26 (and will start shipping October 1) as part of the continued expansion of our
Adaptive EDGE Architecture. The ICF focuses on high availability and resiliency, featuring a simpler auto-configurable design that takes advantage of the decision-making power of the intelligent edge. As a result, ProCurve is able to help reduce the overall cost of ownership of a secure, mobile, converged network. To develop the Interconnect Fabric Switch 8100fl family, ProCurve partnered with a customer, the College of Oceanic and Atmospheric Sciences (COAS) at Oregon State University in Corvallis, Oregon. COAS, a leading graduate institution of oceanography, is using our new family of Interconnect Fabric switches in its network to enhance its ability to intelligently understand, collect, synthesize and route real-time data flows from a wide variety of computational models, networked sensors, satellites and scientific instrumentation. In fact, this is a great example of how ProCurve can acquire new technology ?¢‚Ǩ‚Äú in this case, technologies from Riverstone Networks ?¢‚Ǩ‚Äú incorporate it into our own R&D process, work directly with customers and ultimately deliver a unique ProCurve family of products that has widespread advantages for customers of all kinds worldwide.

Q: Nick Lippis: Is Foundry Networks a short-term relationship that will give way to ProCurve products based upon the Riverstone technology?

A: John McHugh: Again, these are two completely different kinds of relationships: Foundry is a development partner, while Riverstone was a straight technology acquisition. Both product areas are important to us, and they illustrate the wide range of resources that ProCurve is able to marshal as we deliver to customers the network products they want. A basic ProCurve philosophy is to build an intelligent, flexible network infrastructure, and from there to provide customers with choices. We continue to invest heavily in R&D and to hire new engineers. In fact, while HP is trimming jobs, ProCurve is hiring. ProCurve has its own labs and test facilities, and we continue to focus on innovation. Customers aren´t as interested in the pedigree of a product, how it came into being and who handled what piece of the development process. They care who they purchase from, how it fits into their overall solution and who´s backing it. So while we certainly value contributions made by our partners, by the time we introduce any product or service, history gives way to the fact that it´s now a 100% ProCurve product, with all the quality and support backing that the ProCurve name implies.

Q: Nick Lippis: With IP telephony driving infrastructure sales, can ProCurve Networking by HP compete without having IP telephony products?

A: John McHugh: We´ve noticed an interesting trend in VoIP recently: More customers are choosing to purchase IP telephony products from telephone companies than from networking vendors. As a result, one could argue that expending resources to develop our own IP telephony products might not be a wise business decision on our part. This trend plays really well to our strategy, which has always been to build a standards-based infrastructure that´s voice- and convergence-ready ?¬¢‚Äö√ᬮ‚Äö√Ñ√∫ and then let
customers choose the voice products they prefer. Earlier in the evolution of IP telephony, it was true that networking vendors such as Cisco and Nortel made the argument that customers would gain certain efficiencies from using a single vendor for their network infrastructure and voice solution. But the problem with that approach is that it lock