It’s been two and half years since Meg Whitman took over Hewlett Packard Co. in the wake of a controversial $10 billion acquisition, negative comments from the financial community about its strategy, a failed tablet and plummeting stock.
Since then the company has been slowly and steadily turning around. It has some US$9 billion in cash, but the latest quarterly results weren’t spectacular – profits up bur revenue down.
In the first quarter revenue was US$28.2 billion, down 1 per cent from the same period a year ago Profit for three month period was US$1.4 billion, up from $1.2 billion from the year ago period.
That was enough for Whitman to say in a statement that HP “is in a stronger position today than we’ve been in quite some time.”
“The progress we’re making is reflected in growth across several parts of our portfolio, the growing strength of our balance sheet, and the strong support we’re receiving from customers and channel partners. Innovation is igniting our comeback, and at a time when many of our competitors are confronting new challenges, two years of turnaround work is setting us up for an exciting future.”
Some aren’t so sure. Mercurynews.com quoted Cantor Fitzgerald financial analyst Brian White saying that “we believe investors will increasingly require convincing proof that HP’s turnaround has long-term, fundamental underpinnings.”
On the other hand it also quoted Wells Fargo Securities telling investors before the results were released that HP is well along on its turnaround, although a number of business divisions will still go lower this year in revenue.
What HP [NYSE: HPQ] doesn’t have is an out of the park home run winning product that drives revenue. Printers, notebooks and x86 servers are doing well, but revenue from business critical systems plunged 25 per cent and from professional services down 12 per cent.
To get an idea of what’s going on in the company, here are results broken out by division:
Personal Systems revenue was up four per cent year over year with a 3.3 per cent operating margin. Commercial revenue increased eight per cent, but consumer revenue declined three per cent. Total unit sales were up six per cent with desktops units down three per cent and notebooks units up five per cent.
Printing revenue was down two per cent year over year, although the division still chalks up a 16.8 per cent operating margin. Total hardware unit sales were up five per cent with Commercial hardware units up six per cent and consumer hardware units up four per cent. Offsetting that was supplies revenue, which was was down three per cent.
Enterprise Group revenue was up one per cent year over year. Revenue from industry standard (x86) servers revenue was up six per cent, Storage revenue was flat, business critical systems revenue was down 25 per cent, Networking revenue was up four and technology services revenue was down four per cent.
Enterprise Services revenue was down seven per cent year over year. Application and business services revenue was down four per cent, and infrastructure technology outsourcing revenue declined nine per cent.
Software revenue was down four per cent year over year. Support revenue was down two per cent, license revenue was down six per cent, professional services revenue was down 12 per cent and software-as-a-service (SaaS) revenue was up six per cent.
HP Financial Services revenue was down nine per cent year over year with a six per cent decrease in net portfolio assets and an 18 per cent increase in financing volume.
Corporate Investments revenue increased due to the sale of a portfolio of mobile computing intellectual property.