HP and Tech Data Report Lower Sales for Quarter Ended Oct. 31

HP and Tech Data both reported on Tuesday sagging sales for the quarter ended Oct. 31, 2015.

For the period, HP, which post-split next year will begin reporting results as two separate entities—HP Inc. and Hewlett Packard Enterprise, respectively—reported sales of $25.7 billion, down 9 percent compared to one year ago. Earnings, meanwhile, totaled $1.3 billion, or roughly flat compared to last year.

This marks the fifth quarter in a row in which sales have fallen at the California computer giant, according to Reuters. This time around, slow sales of PCs, printers, storage products and business services contributed to the decline. For example, revenue from personal systems and printing systems both fell by 14 percent this quarter. Also troubling: revenue from a promising area for many companies, software-as-a-service (SaaS), declined 2 percent for the period.

Year-to-date revenue for the company totaled $103.4 billion, down 7 percent compared to 2014.

Similarly, results from Tech Data Corp. were depressed compared to a year ago. Sales at the Clearwater, Fla., company, which is the world’s second largest broad-line products and services distributor, fell by 5 percent to $6.4 billion for the quarter. Despite the decline, net income remained relatively steady at $41.9 million.

While the company did its best to put a positive spin on the quarter—Tech Data CEO Robert Dutkowsky he was “pleased to report that Tech Data delivered another solid quarter in Q3 of fiscal 2016” in prepared remarks—investors and Wall Street reacted differently. In trading after the company’s results were made public, shares of TECD were off by more than 10 percent at one point on Tuesday.

The response from the investment community begs an obvious question: how can two well-run companies that produce an abundance of customer value and profits despite sagging sales regain their footing in the market?

The answer, some say, comes down to the amount of pure cloud business that each generates. Though each company has made steep investments into cloud technology and services, they still generate only a fraction of their sales from cloud activities. Compared to Amazon, which generates billions of dollars from cloud sales, or Microsoft, which has a complete cloud portfolio and strategy, HP and Tech Data are not seen as cloud vanguards, their meaningful advances in cloud notwithstanding. HP, for one, recently backed away from public cloud aspirations, essentially ceding market share to Amazon Web Services (AWS).

Said one industry analyst who wished to remain anonymous, “These two giants have both done an amazing job to reign in expenses but all the market and street want to see is cloud sales growth. Until they demonstrate leadership there, they will struggle despite their obvious strengths.”