HP weathering economic gloom 25 November, 2008 By Paul Weinberg

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Its positive financials included net revenues of $33.6 billion, up 19 percent from a year earlier and up 16 percent when adjusted for the effects of currency. Excluding EDS revenue, net revenue grew 5 percent year over year or 2 percent when adjusted for the effects of currency.

"One thing that HP has got going for it generally is that it is a much diversified company in terms of IT. It has everything from printers, desktops, networking gear and servers and services. That it means it may be a little bit more robust in terms of the changes in the market," stated John Sloan, senior analyst at Info-Tech Research.

He compared HP's position to competitor Dell which is engaged in fewer product categories such as PCs, servers and storage and is thus more vulnerable to a switch in consumer demand.

"HP can absorb the ups and downs a little bit better because it is into so many different markets."

Other then the notebook surge and a bump in revenue from the acquisition of professional services firm EDS, HP's results in other product categories "were a little bit down and a little bit up," Sloan added.

HP's traditional cash cow in its Imaging and Printing Group, for instance, experienced a one per cent decline in its revenue in 4Q08 to $7.5 billion while printing supplies (i.e. toner) went up 9 percent.

A combination of strategies by HP has made it less dependent on hardware sales, commented industry analyst Michelle Warren, president of MW Research & Consulting.

She pointed for instance to HP's recent decision in the U.S. and Canada to establish new channel partner designations based on product competencies and individual revenue growth. This would enable HP to direct resellers with specific expertise to the right end user customer, Warren explained.

"There are so many partners out there in the channel. It can be difficult to wade through, and pick the most appropriate one."

Warren also noted how HP like its competitor IBM is making a big push in "information management and data optimization."

She referred specifically to HP Software which experienced a 13 percent growth, and revenues of $855 million in 4Q08.

"[HP Software] is where they are going to generate their revenues, new opportunities and subsequent sales. They have over the last couple of years made some aggressive purchases of companies," she said.

Stuart Williams, a senior analyst at Technology Business Research, echoed this sentiment while noting HP Software along with competitors BMC, CA and IBM are benefiting from the pressures placed on CIOs to replace IT staff with automation software tools. He estimated that the IT budget is growing "twice as fast" as the rest of the corporate budget in many enterprises.

"It is much less expensive to make this kind of investment, in reliable automation, tools. Then you can relieve the headcount on the back side and make some long term gains in terms of the operations."

HP's acquisition of Opsware which offers a run time automation solution helped round up the software division's portfolio of business technology optimization solutions.

"HP software [can] now discover, monitor, manage and automate network services, servers, storage and applications."

Meanwhile, in these difficult times more and more customers may be relying on HP Financial Services to help finance the purchase or lease of large deployments of HP system hardware.

In 4Q08, HP Financial Services reported a 5 percent increase in revenues, now totaling $691 million. Financing volume also increased by 5 percent.

"Certainly if accounts receivable starts drifting out -- in day's sales outstanding -- that could be a problem along with defaulted leasing or financing deals," stated Rob Enderle, principal analyst at the Enderle Group. "But given the economic conditions, [this is] hardly unique to HP. They were burned rather badly by the Circuit City failure by $150 million if memory serves, but it appears their finance organization is working furiously to manage this as well."