HP Services, Software: 2 Weak Spots In Strong Quarter
Hewlett-Packard evangelists sound pretty excited by the company’s latest quarterly financial results. The Associated Press noted “revenue was up in most of the technology company’s major divisions and HP raised its 2010 outlook, citing accelerating market momentum.” Great news for HP partners. But there were two weak spots in the earnings report: HP Services and HP Software. Here are the details.
According to HP’s earnings release:
- Services revenue decreased 1% to $8.7 billion — though operating profit was $1.4 billion, or 15.8% of revenue, up from $1.1 billion, or 12.9% of revenue, in the prior-year period.
- HP Software revenue was flat at $878 million — though operating profit was $167 million, or 19.0% of revenue, up from $140 million, or 15.9% of revenue, in the prior-year period.
Translation: Cost cutting gave HP Services and HP Software a boost while both divisions failed to deliver top-line growth. In stark contrast, business looked far better in HP’s Enterprise Storage and Servers (year-over-year quarterly revenues were up 11%), Imaging and Printing (up 4%), Personal Systems Group (up 20%) and HP Financial Services (up 13%).
Two Areas that Need Fixing
First, let me be clear: HP’s quarterly results beat Wall Street’s expectations, and the company’s decision to raise earnings guidance for 2010 indicates that the company is bullish about business. That’s great news for HP partners.
Still, most of the good news involves HP hardware. Now, the bad news: At a time when top MSPs are seeing their recurring services revenues grow dramatically, HP Services saw its own quarterly revenue dip 1 percent. That’s somewhat cause for concern.
The bigger concern involves HP Software, where revenue was flat. Disruptive rivals like Nimsoft and Groundwork Open Source (among others) have claimed to be chipping away at HP OpenView’s installed base. Perhaps there’s something to all of those claims.
Frankly, I remained thoroughly confused by HP’s inability to reposition or redesign OpenView for MSPs…