Welcome!

Virtualization Authors: Greg Ness, Elizabeth White, Pat Romanski, Kevin Benedict, Liz McMillan

Related Topics: Virtualization, SOA & WOA, .NET, HP, Cloud Expo, SDN Journal

Virtualization: Article

HP Bleak But Not as Bleak as Usual

In fact HP forecast Q2 earnings that exceeded Wall Street estimates

There wasn't anything particularly pretty about HP's first-quarter posting Thursday except that it was better than anybody expected, allowing CEO Meg Whitman to buy time and declare that her five-year turnaround is starting to take root and allowing punters to push the bedraggled stock up better than 5% after-hours.

In fact, although both sales and earning dropped in fiscal Q1 for the sixth consecutive time, HP forecast Q2 earnings that exceeded Wall Street estimates. It said profits, excluding items, will be 80 cents-82 cents a share, compared to estimates of 77 cents.

Uncharacteristically the company did not lower its forecast for the year. It still expects to earn $3.40-$3.60 a share, though the consensus has been for $3.32.

HP's fiscal Q1 revenue fell 5.6% year-over-year to $28.4 billion, compared to analyst estimates of $27.8 billion. Profits amounted to 82 cents a share, compared with estimates of 71 cents. Net income skidded 16% to $1.23 billion, or 63 cents a share GAPP, from $1.47 billion, or 73 cents, a year earlier.

HP itself only predicted earnings of 68 cents-71 cents a share in November.

Dell, by comparison, just saw its fiscal first-quarter revenue off 11% to $14.3 billion, while net income tumbled 31% to $530 million, or 30 cents a share. It's trying to go private thinking the best way to turn around is out of public view.

"While there's still a lot of work to do to generate the kind of growth we want to see, our turnaround is starting to gain traction as a result of the actions we took in 2012 to lay the foundation for HP's future," Meg said in the statement.

"Our primary focus is to deliver on the full-year outlook, and I feel good about the rest of the year. We'll be bringing a number of new programs and disruptive innovations to market in the coming quarters, and we expect the benefits from our restructuring will accelerate through fiscal 2013."

On of the things brightening her outlook is the imminent arrival of HP's ARM-based Project Moonshot microservers next quarter. The company is taking first orders now and the very first one came from Japan, whose grid was kicked around by the tsunami two years ago.

Whitman expects the widgetry to "revolutionize the economics of the data center," and said that if 10 large web services switched to Moonshot servers, they could save $120 million a year and keep a million metric tons of CO2 from polluting the atmosphere. She figures they could save 89% on power, 94% on space and 63% on cost.

Anyway, back to the here and now. According to the press release:

  • PC sales fell 8%. Sales to commercial accounts fell 4% and 13% to consumers. Desktop sales rose 10%; notebook sales fell 14%. Total unit sales fell 5%, a little more than Gartner's global numbers.
  • Printing revenue dropped 5%, though operating margins were 16.1%. Units were down 11%. Commercial was down 6%, consumer 13%.
  • Enterprise revenue declined 4%. Networking was up 4%. Industry standard servers fell 3%. Business-critical servers, like HP's Itanium boxes, dropped 24% - again. Storage was down 13%. Servers are facing shrinking profit margins.
  • Enterprise services fell 7%.
  • Software sales fell by 2%. That would include HP's bête noire Autonomy. Apparently Vertica and security are doing okay. Support was up 11%, license revenue down 16%, service revenue down 8%.

HP has previously said it expected revenue in each of its major businesses to fall this fiscal year.

It made some progress paying down its debt. The net debt of HP's operating company dropped a billion dollars to $4.7 billion, which shouldn't take too much longer to retire completely. HP generated $2.6 billion in operating cash flow in the quarter.

The company is down 15,300 people out of the 29,000 it wants to lay off to save money.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.