HP Sales Benefit From PC Upswing, But Growth Remains Elusive

Hewlett-Packard surprised Wall Street with a rise in quarterly revenue, but the latest figures from the technology giant reveal it is not out of the woods yet.

The sales growth was helped by a 12 percent revenue climb for HP’s Personal Systems group (the PC unit), which recorded a 14 percent rise in commercial revenues and a 8 percent rise in consumer revenues.

Mixed Results

Despite the modest upswing in quarterly sales and the strong performance of its PC division, the latest financials from HP could best be described as mixed, as some divisions saw flat performance, whilst others declined.

For the third quarter ending 31 July, HP posted an overall net profit of $985m (£594m), down from $1.4bn (£838m) in the same year-ago quarter. Revenues rose however a very modest 1 percent to $27.6bn (£16.6bn) from $27.2bn (£16.4bn) a year earlier.

Wall Street analysts had been expecting a revenue drop to $27.01bn (£16.3bn). And the fact that HP managed to increase its quarterly sales, means that it has ended eleven consecutive quarterly declines in revenue.

“Overall, I’m very pleased with the progress we’ve made,” said Meg Whitman, chairman, president and CEO at HP. “When I look at the way the business is performing, the pipeline of innovation and the daily feedback that I receive from our customers and partners, my confidence in the turnaround grows stronger.”

HP’s PC division recorded a 12 percent revenue rise on the back of a total rise of 13 percent of units shipped. This included a 9 percent rise in desktops shipped, and 18 percent rise in laptops. But there was less good news with other HP units. Printing revenue was down 4 percent; enterprise services revenue was down 6 percent; software revenue was down 5 percent, and HP financial services revenue was down 3 percent. That said, revenue from the Enterprise group rose 2 percent.

Whitman admitted in an interview with Reuters that she had been surprised at the performance of the PC division, especially given that HP is seeking to lessen its reliance on PCs and focus more on servers, storage and networking.

“It’s a turnaround in a declining business,” Whitman reportedly said, and pointed to a 9 percent increase in sales of servers, helped because of market uncertainty around Lenovo’s acquisition of IBM Corp’s low-end server unit.

“We’ve been able to capitalise on that uncertainty and our win rates are up against IBM,” Whitman was quoted as saying.

However Whitman has also followed Cisco boss John Chambers as identifying poor PC sales from Russia and China, as foreign markets continue to react to the NSA spying revelations from Edward Snowden.

Turnaround Struggles

But there is little doubt that the turnaround plan at HP is still very much a work in progress. The company has been cutting costs savagely in recent years in an effort to increase profitability and return to growth.

The workforce at HP has borne the brunt of this cost cutting. In May 2012 HP said it would axe 27,000 jobs, as part of its “2012 Plan” to turnaround the business. Then in September 2012, HP increased the number of positions to go to 29,000 staff.

But the job cuts kept coming as growth remained problematic, and in December 2012 it said it would axe 34,000 jobs in total from its 250,000 global workforce.

And the misery was compounded this May when HP said it could axe another 16,000 staff.

All the while HP remains locked in an increasingly bitter dispute with the former management team of Autonomy, over the high price it paid to buy the British analytics firm in 2011.

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