HP looks to its Services division to carry the load
Hewlett-Packard's recent acquisition of EDS is going great. Swimmingly. Normalizing ahead of schedule, even. That's nice, because Services is getting to be a big deal for an HP that otherwise experienced declines virtually across the board over the second quarter recently ended. Indeed, the recession is still with us, and HP's profits are down 17%, or $400 million, year over year.
Services revenue grew 99%, but those numbers are skewed by the acquisition. Otherwise, only the Technology Solutions Group saw year-over-year growth, with other departments down between 6% (HP Financial Services) to 28% (Enterprise Storage and Servers). Analog printing's ongoing movement to digital led the Imaging and Printing Group to 33% of HP's Q2 profits. In the Personal Systems Group, total units sold remained flat, with sales of desktops off by nearly 25%. Sales overall would have been up 3% were it not for those pesky currency fluctuations; as it is, they're down 3%.
CEO Mark Hurd sounded confident that the company's on track to weather the storm, citing the firm's efforts to broaden its portfolio (the EDS acquisition, for instance), increasingly efficient cost structure, and history of execution (did they mention that the progress of the EDS acquisition was tracking ahead of schedule?). There's other good news, Hurd said; the company sees some slight improvements in the US consumer markets (revenue in the Americas is actually up 9% year-over-year), in China, and so forth, and the company's predictions for Q2 "behaved roughly, each month, as we expected."
However, he added, there's no expectation of substantial improvement through the rest of the year. That pronouncement was a bit unnerving to tech industry observers, who have been hopeful that HP would add data collaborating a recent claim by Intel CEO Paul Otellini that things seem to be picknig up a bit at the end of last quarter.
For the quarter ahead, HP says it's going to work of gaining market share in the weak market. The company says they it expects revenues to be flat quarter to quarter, or to perhaps show a decline of up to 2% -- a departure from usual seasonal trends, which normally see an uptick in Q3. For the rest of FY '09, the company expects declines of between 4% and 5%.
Wall Street was unsurprised. HP started the day at $35.97, closed up 2.38% to $36.58 at day's end, but dropped down to $34.76 in after-hours trading.