HP is in its 2nd year of its business restructuring and does not expect to fully recover (ie., expand) until 2014. In EMEA, HP last reported an 11% decline in business.
In 2013 Q1, software revenue accounted for 926 million in revenue, down 2% from last year with a 17.0% operating margin. Support revenue was up 11% while license revenue fell 16% and services revenue dropped 8% year over year.
Enterprise Group revenue declined 4% year over year with a 15.5% operating margin. Networking revenue was up 4%, Industry Standard Servers revenue was down 3%, Business Critical Systems revenue was down 24%, Storage revenue was down 13% and Technology Services revenue was down 1% year over year. HP still believes in the growth in convergence and server storage. The company is betting that energy savings in servers will matter to customers. Codenamed "Project Moonshot," HP is designing servers that are powered by Intel's (INTL) Atom chip.
Enterprise Services revenue declined 7% year over year with a 1.3% operating margin. Application and Business Services revenue was down 9% year over year, and IT Outsourcing revenue declined 6% year over year.
Last quarter HP managed to improve margins in printing by 3.9%. Printing revenue declined 5% year over year with a strong operating margin of 16.1%. Total hardware units were down 11% year over year. Commercial hardware units were down 6% year over year, and Consumer hardware units were down 13% year over year. Small innovations helped as HP released new multi-function printers in the last quarter. Ink sales grew by 32%. The recent release of Officejet Pro X should help reverse declines in the printing unit in the quarters ahead.
Weak demand in the PC market is still expected throughout 2013, but its impact is minimal because last quarter the $223 million profit at the Personal Systems Group division contributed just 10% of operating profit.
Two key products in a declining PC market provide an example of HP innovation: the EliteBook Revolve and the Google Chromebook. Despite shipments declining by 5%, HP's diversification from Windows 8 should broaden its brand to a wider customer base. HP will be launching an Android-based tablet in April 2013, which under-prices Google's current Nexus 7.
HP Financial Services revenue grew 1% year over year as a 1% increase in net portfolio assets was offset by a 25% decrease in financing volume. The business delivered a 10.6% operating margin.
You can ask yourself what wrong with HP time and time again and you come up with the same answer: its the top of the executive ladder that seems to be missing a rung.
Internet superstar exec Meg Whitman joined the Board of HP in 2011 and 9 months later was thrown into the CEO job after the HP Board had made several diastrous choices.
Whitman is a natural leader and an excellent corporate executive but let's look at her background...
Margaret Cushing Whitman served as president and chief executive officer of eBay from 1998 to 2008. In the 1990s, she served as an executive for DreamWorks, Procter & Gamble, and Hasbro (as Playskool Division General Manager, she oversaw global management and marketing of two children's brands, Playskool and Mr. Potato Head). Throughout the 1980s, she had served as VP Strategic Planning throughout the 1980s in The Walt Disney Company.
Hmmm...great companies that make a great resume. But no channel-driven companies on that list. Not one.
Meg Whitman is smart, but she lacks experience running a channel-based company. Sure, she was once the head of marketing for Mr. Potato Head but selling via toy dealers and EBay etailers is not even close to the sophistication of today's IT channel (especially enterprise).
So when the HP CEO took to the stage this year at the HP Global Partner Conference 2013 (with 2000-plus of the companies top global partners there) she started off with this apologetic tone:
Last year, she said, she’d been with HP just a short time. “It’s great to be back, with a little bit more time under my belt, a little bit better understanding of HP, and a little bit better understanding of our channel partners.”
One of the first things she learned was that “our partners built Hewlett-Packard” from the beginning.
“Everywhere I go, I tell our employees, our investors, and you one thing — I love the channel. You’re a huge part of our success and a huge part of our future.”
“The last couple of years at HP have not been easy. We’ve had missteps, challenges, a lot of changes at the top of Hewlett-Packard. But we are making progress,” Whitman told her audience just before offering her thanks.
Does all that sound more like Carly Fiorina than a Steve Jobs or Michael Dell?
She went on...“We’re on a journey to turn HP around,” she says. It’s not going to happen overnight, but “we know what we need to do, and we’re doing it.”
We’re now in Year Two of Whitman’s 4-Year Plan to restore growth to HP. Yes, 4 years-- the equivalent to an entire term of an elected American president who is expected to turn around the US economy in that time. (Yes, Whitman has political ambitions and lost her bid for Governor for California. And she still pops up on some lists as a candidate for the first woman President of the United States.)
In FY12, Whitman says the goal was to really diagnose the problem, and develop the plan with “to set this company up for the long haul.”
Really? All those smart HP people who consult global enterprises on how to use IT to turn their companies around...imagine if they told their customers: "First, we'll spend a year figuring out the problems and the plan and then we'll come back to do something..."
OK, at the HP Global Partner Conference 2013, it wasn't all apology. HP announced simplified partner programs (if you compare to previous HP programmes), more predictable performance rewards, and more tools for partner engagement.
In fiscal year 2013, HP says it will invest approximately $1.5 billion worldwide in channel programs and IT initiatives designed to reward performance, drive demand and simplify partner engagement.
Hey, you could never argue with that Holy Trinity of channel desire. But that's just it: there is no innovation in repeating what partners tell you year-in and year out.
By their own admission, 67% of HP business goes through the channel and more than $1 billion sat in that room at the global conference. They've heard it all before. "Show me the money" isn't just a cry you hear from professional athletes.
HP used to be synonymous with innovation. At the GPC 2013, when Bill Vegte, COO, took the stage he presented HP’s “innovation agenda” or how all the pieces HP brings to the table adds up to “solutions for the new style of IT.”
He says last year HP was issued more patents than any company in Silicon Valley. That either says little about Silicon Valley or says a lot about HP is hiding its light under a dark cellar.
Vegt talked about “a unique time in our industry.” He argues “It will be a messy world” for the next half-decade while the market figures the whole private/public/hybrid cloud world out.
That means both responsibility and opportunity for channel partners to help ease that transition, said Veghte.
Marty Homlish, chief marketing officer, he says, there were too many HPs — their marketing presence had no unified look, feel, or message. Homlish says that in their quest to re-invent the HP image, they decided to focus on HP as “a people company,” in contrast to many of its competitors, who focus on the technology on which they specialize.
Somehow that should contrast nicely with Lenovo... who are busy concentrating on selling gear instead of defining themselves.
Whitman adds her thoughts on innovation: “It’s what helps us stand out in a crowed market, and opens up opportunities for your business.” The company has lots of innovation going on, but HP “needs to do a better job of commercializing that innovation so you can go sell it to your customers.”
It sounds like the innovations haven't made it out of the garage.
There’s still a lot more to do for partners, she admits, including a new, globally-consistent PartnerOne tiering model, more partner support tools, fewer (but more structured) certifications and specializations, and new programs for partners who sell across the entire HP portfolio.
There’s now a major shift, Whitman explains, in how technology is purchased and used about every 10 years, and one of those is happening right now.
“But having lived through these changes before, what’s going on right now feels different. This is nothing less than a totally new style of IT. It’s changing how it’s consumed and how it’s delivered. It’s changing how businesses work with technology. It promises greater speed and scale.”
HP stockholders are all in favor of greater speed, if not greater scale.
Go HP Global Partner Conference 2013