Hewlett-Packard's fiscal second quarter saw revenues drop for all the major business segments except for services, which almost doubled revenues thanks in large part to EDS, bought by HP in 2008, HP officials say. Overall, HP reports it saw revenue drop 3 percent over the same period. HP officials say the company will continue to trim expenses and plans to cut another 2 percent of its work force over the next 12 months.
Services was the lone shining light in an otherwise difficult fiscal second
quarter for Hewlett-Packard,
thanks in large part to its $13.9
billion acquisition of EDS
In announcing second-quarter earnings May 19, HP officials said the $8.5
billion in revenue that the company's services business pulled in almost
doubled from the same period the previous year.
At the same time, President and CEO Mark
Hurd said HP's scale and work force contributed to the growth of EDS-and
its overall services business.
"We are seeing more deals than EDS
saw before [the acquisition] because of our position in the marketplace [and]
because of our sales force," Hurd said in a conference call with analysts
EDS will contribute even more down the
road beyond increasing revenue. After the acquisition, HP officials predicted that
annual savings from the EDS deal would be
about $2.5 billion per year. However, Hurd said based on real estate in
connection with the EDS deal, another $500
million per year in savings were found, putting the overall savings from EDS
at $3 billion per year starting in 2012.
HP's other businesses did not fare as well in the fiscal second quarter,
with everything from PCs to storage to printing seeing revenue decreases of
between 6 and 23 percent. Companywide, revenue came in at $27.4 billion, down
about 3 percent over the same period the previous year. The only areas with any
positive steps were in China
and among U.S.
consumers, Hurd said.
Hurd and Cathie Lesjak, executive vice president and chief
financial officer, both said HP executed well, not only on the business side
but in driving expenses down. However, Hurd said more needs to be done, adding
that HP would cut another 2 percent of its work force over the next 12 months.
Looking forward, Hurd said HP expects revenue to be flat or down 2 percent
for the fiscal third quarter, and 4 to 5 percent for the year.
Enterprises are still keeping a tight hold on their money, keeping systems
around longer than normal, Hurd said. He doesn't expect that to change until at
"I have customers telling me, 'We're just delaying as long as we can
until we have to buy,'" Hurd said. "I think CIOs have given marching
orders [to] just keep that infrastructure running."
"HP's results demonstrate continued reluctance of businesses to invest
in IT, as the commercial hardware segments' revenue declined the most during
the quarter," Josh Farina, an analyst with Technology Business Research,
said in a research note.
Still, Hurd said he likes HP's position once the economy improves, given its
scales, breadth of offerings and work in reducing expenses. He and Lesjak
talked about the company's ability to not only sell products, but to offer
integrated solutions that meet the growing demand of the evolving data centers,
such as the BladeSystem
an all-in-one offering that includes computing, storage, networking
and management software.
"We like our chances when the rebound occurs ... because of what we're
doing now," Hurd said.