Hewlett-Packard has been around for 73 years, and as expected from such a long term, it has seen bad quarters in terms of revenue. But the most recent loss, which is estimated to be $8.9 Billion USD, is by far the largest the company has seen in its entire life. Surprisingly, there was very little panicking from the company itself, as HP’s CEO Meg Whitman and their investors are already prepared.
HP recently had an $8 billion writedown against its services division, as a result of its $13.9 billion acquisition of EDS last 2008. Said writedown was the last big thing that the company needed to do in order to get out of its rut, with the Q3 revenue being marked at $29.7 billion, a 5% decline. Whitman tells analysts that they are still in the early stages of a turnaround.
Last March, HP has consolidated its PC and printer departments, and has announced plans to eliminate 27 thousand jobs, with as many as 9 thousand employees being laid off by the end of their fiscal year. Now, the company has bumped up the number to 12 thousand, as a result of employees better than expected acceptance of an early retirement package.
In a recent call with analysts, Whitman outlined some key areas that are crucial to the company, including the migration to Windows 8. While their personal systems group revenue dropped by 10 percent, HP has tablets ready for the upcoming windows 8, along with PCs that can double as tablets.
According to Pund-IT analyst Charles King, PC makers are currently feeling the pressure from smartphones and tablets, along with consumers who are refusing to spend more on PCs while waiting for the release of Windows 8. Add the fact that it’s a generally weak financial performance for all global markets, and you’ll have the perfect storm for Hewlett Packard.
On their server business, HP is investing a lot of effort into the high end side of the market, with their so-called hyperscale computing, which involves the use of low energy chips and scale out architectures for cloud, supercomputing, and web uses.
According to analysts, HP’s competition with Oracle over the development on the new Itanium platform has hurt their business critical systems. How HP will be handling the Itanium platform, the Unix OS HPUX, and the role of x86 systems in the years ahead has not been elaborated on.
Experts agree that HP needs to get through the Windows 8 transition as well as fix their services decision. While a California court recently ruled that Oracle must continue porting their software to Itanium, the damage has already been done and customers are now uncertain around the platform.
Fortunately, despite the limited long term prospects for Itanium, its installed base will continue to buy upgrades, so there’s very little chance that uncertainties around the platform will affect HP’s x86 server business.
HP is also one of the lowest cost x86 server producer, which is going to continue being a relatively decent margin business for the company. Their software revenue is also decent, seeing an 18 percent increase this quarter. Whitman believes that the key reason is product integration, as proven by the recent acquisition of information management software firm Autonomy, and data warehouse and analytics vendor Vertica. HP’s cloud systems segment is also seeing growth, with a current count of 750 unique customers.