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HP Keeps Ticking Despite Loss of Hurd

The Quarter Was Decent, Especially Under the Circumstances

HP's performance in the October quarter under its interim CEO, CFO Cathie Lesjak, was slightly better than Wall Street thought it would be.

Lesjak had to step in after Mark Hurd was forced to resign on August 6. The results have nothing to do with Hurd's permanent replacement, the subpoena-dodging Léo Apotheker, who didn't officially pick up the reins until November 1, the beginning of the company's new fiscal year and the day the Oracle v SAP trial started. Oracle wanted the ex-SAP CEO for a witness but Apotheker stayed beyond the reach of Oracle's process servers these last three weeks, reportedly flitting around the world meeting with employees, customers and partners.

During the earnings call Monday Apotheker said, "A competitor has tried to distract us" from running HP.

He said he was at HP headquarters for the call.

Anyway, HP earned $1.33 (non-GAAP), up 17% year-over-year, on revenues up 8% to $33.3 billion in the quarter. Analysts expected it to make $1.27 on $32.7 billion. It reported the same consumer weakness and stronger commercial business as Dell and benefited from the same lower component costs.

This quarter HP is projecting revenue of $32.8 billion-$33 billion, GAAP EPS of $1.06-$1.08, and non-GAAP EPS of $1.28-$1.30, with real estate sales contributing four cents. Analysts expected $1.22 on revenue of $32.72 billion.

Apotheker claimed customers want to do more business with HP, promised to reinstitute the raises that Hurd had curtailed, give HP employees in California a more collaborative workplace and address R&D, which Hurd supposedly shortchanged. Actually sounding little changed from Hurd he said it wasn't a matter of spending more on R&D but "accelerating cycles" and "knocking down silos." Lesjack spoke of incremental investments and counted HP's recent acquisitions as R&D investments.

Unsurprisingly Apotheker said that HP's software position should be doubled or tripled, organically and non-organically. Otherwise he said he wasn't ready to commit the company to new strategy, pushing "a more robust perspective" off a few months.

In the quarter HP's revenues were up 10% in the Americas to $15.1 billion; up 6% in EMEA to $12.4 billion and up 8% in Asia Pacific to $5.8 billion. Revenue from outside of the US accounted for 64% of the total, with revenue in the BRIC countries increasing 12% and accounting for 10% of HP's total revenue.

PCs earned $568 million on revenues up 4% to $10.3 billion, with notebooks down 3% year-over-year and desktop revenue up 13%. Commercial revenue was up 20%, while consumer revenue dropped 10%. The unit's operating margin was 5.5%.

Enterprise Storage and Servers (ESS) revenue were $5.3 billion, up 25%, to earn $730 million. Industry standard server revenues increased 32%. Storage revenue increased 14% and business critical systems revenue grew 10%. Blade revenue was up 51%.

HP's software revenue increased barely 1% to $974 million to yield $247 million. Business Technology Optimization revenue increased 4%, while other software revenue dropped 6%.

HP networking revenue increased 227% in the fourth quarter including the 3Com acquisition, which closed last April. ProCurve revenue grew 50% year-over-year.

Services were only good for a 0.4% revenue increase to $9 billion earning $1.5 billion.

Revenue from HP's printer group was up 8% to $7 billion with ink up 6%. HP said commercial hardware revenue was up 22% and consumer hardware revenue was down 2%. Printer unit shipments increased 14%, with commercial printer hardware units up 43% and consumer printer hardware units up 7%. The division, which has historically been the company's profit generator, earned a flat year-over-year $1.2 billion.

For the 2010 fiscal year HP, the largest IT company in the world, did $126 billion, up 10%, returning $4.58 (non-GAAP) or $3.69 (GAAP), up from $3.14 last year.

It's projecting the 2011 number will be $132 billion-$133.5 billion, earning $4.42 to $4.52 (GAAP) or $5.16 to $5.26 (non-GAAP).

HP has $11 billion in the bank.

 

 

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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