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Sales & Marketing


HP Q3 2013 Earnings: 2014 Turnaround Is Behind Schedule

  • Written by The VAR Guy 1
  • August 21, 2013

Is Hewlett-Packard's (HPQ) turnaround falling behind schedule? It sure sounds like it. During a Q3 2013 earnings call today, HP CEO Meg Whitman backtracked from a previous growth prediction for 2014, and said year-over-year revenue growth in fiscal 2014 is now unlikely. Although Whitman assured investors that HP is still on track to turn itself around, Wall Street disagreed and shares are now down more than 7 percent in after-hours trading. So what's the upshot for partners?

 

Is Hewlett-Packard‘s (HPQ) turnaround falling behind schedule? It sure sounds like it. During a Q3 2013 earnings call today, HP CEO Meg Whitman backtracked from a previous revenue growth prediction for 2014, and said year-over-year revenue growth in fiscal 2014 is now unlikely. Whitman assured investors that HP is still on track to turn itself around. But Wall Street disagreed and shares are now down more than 7 percent in after-hours trading. So what’s the upshot for partners?

The answer is pretty simple: Four out of HP’s five core businesses are still shrinking while the IT industry’s cloud, mobile, social and big data waves continue to grow larger.

HP’s Q3 2013 earnings slightly missed analyst expectations. Then, Whitman’s vague statements about cloud momentum didn’t inspire confidence. And during the earnings call Whitman made this statement — which spooked investors:

“Now let me turn to our future outlook. As you know, I stated in May that I believe that company level revenue growth was still possible in fiscal 2014, particularly given the challenges I just highlighted in enterprise group and personal systems as well as the fact that 2013 revenue from key accounts in enterprise services is running off more slowly than anticipated. We now expect that total company year-over-year revenue growth in fiscal 2014 is unlikely. That said, I remain confident that we are making progress in our turnaround. We are already seeing significant improvement in our operations. We are successfully rebuilding our balance sheet. Our cost structure is more closely aligned with our revenue. We have reignited innovation at HP with a focus on the customer. So I do expect that we will see pockets of year-over-year revenue growth across certain parts of the business in 2014. As is our normal practice, we will give a more comprehensive outlook on 2014 including EPS at our Security Analyst Meeting on October 9 and I look forward to seeing you all there.”

Where’s the Winner?

No matter where you look, HP’s Q3 2013 revenues looked weak:

  • Personal systems revenues fell 11 percent.
  • Enterprise group revenue fell 9 percent.
  • Enterprise services revenue fell 9 percent.
  • Software revenue grew a mere 1 percent.
  • Finances revenue fell 6 percent.

Read between the lines and…

  • HP can’t escape from the PC slump.
  • The enterprise business is under serious pressure from Cisco Systems’ server and networking efforts and EMC’s storage business. Plus, cloud computing is putting the squeeze on data center hardware sales, The VAR Guy insists.
  • Software revenue rose only 1 percent – but HP insisted that was a good showing. 

Software Bright Spot?

HP CFO Cathy Lesjak said:

“Software had a solid quarter with revenue up 1% year-over-year to $982 million. We are especially pleased with the continued performance in our strategic areas of cloud, security and big data. Sales of our security solutions grew double digits while Vertica revenue was up triple digits. At the same time, we continue to prune our professional services portfolio which tampers revenue growth, but improves profitability.”

Added Whitman:

“Performance in software was driven by strength in security which saw double-digit revenue growth, strong momentum in Vertica which saw triple-digit growth and sequential license revenue growth in Autonomy. In addition, we saw pockets of improvement in IT management, although we saw continued pressure from the shift to SaaS coupled with a portfolio that is weighted towards services and support.”

HP barely mentioned Autonomy during the earnings call other than Whitman’s brief nod to that business above. Whitman also mentioned cloud momentum multiple times during the call, but didn’t share any revenue figures for that portion of the business.

Bottom line: Right now it’s difficult to see where HP is a true market leader in the post-PC era. And 2014 revenues won’t likely grow, even Whitman now concedes. That’s a bummer for HP investors and channel partners.

Tags: Agents Cloud Service Providers MSPs VARs/SIs Sales & Marketing

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