Firstly, overall they confirm our own long-held predictions that the IT market is contracting with revenues down 3% to $27.4b. But the geographic variances were marked. “When adjusted for the effects of currency, revenue grew 12% in the Americas while declining 2% in Europe, the Middle East and Africa and 5% in Asia Pacific.”
Secondly, the variations between HP’s disparate activities were huge.
Enterprise Storage & Services suffered a massive 28% decline.
Imaging and Printing saw revenues plunge 23% to $5.9b as consumers and businesses alike tried to cut costs on things like replacement ink cartridges
In PCs, unit shipments “in a challenging environment” were flat but plunging unit prices meant that revenues declined 19% to $8.2 billion.
We have said on so many occasions that the PC world is changing fast. IDC recently reported that netbook sales went up 7x to c4.5m in Q1 2009 – representing c8% of the total market. IDC reckon c22m netbooks will be shifted in 2009. Although netbooks have obvious limitations they are ‘good enough’ for many students, consumers and business travellers. The move to smartphones also effects laptop sales. I find that my iPhone is really all I need on a short business trip – where previously I’d take my laptop. All this has major effects on HP (and Dell etal) business model as it means either that they sacrifice revenue and margin on their core PC/laptop business or they give way to competitors. As it happens both are happening as the really excellent results from Acer show. Amazingly Acer were the lead supplier of laptops (including netbooks) in EMEA in Q1 2009 overtaking HP.
As Mark Hurd (CEO) said “consumers are buying more computers than we expected but are now inclined to buy cheaper notebooks than full machines”.
But it was the shift to HP – the Services company, which is most marked (see accompanying post).
In this respect, HP clearly sees IBM as the role model. The move to higher margin services is clearly right but what does HP do with its ‘commodity’ hardware lines in the future? We should all remember that IBM sold both its PC business to Lenovo and divested its own Printer and Imaging operations. Is it beyond the realms of fantasy to even suggest HP might go down that path?
But it was Hurd’s outlook statement which sent HP’s shares down 5% in after-hours trading. He guided analysts to a c5% revenue decline in Q3 – much greater than had previously been forecast saying that he needed another quarter at least to determine whether the global recession had bottomed. We think it will take at least another year before we see growth again in the overall IT market. But there is great opportunity (or threat) for major diversity in the various sub-sectors that HP addresses.
But it was the shift to HP – the Services company, which is most marked (see accompanying post).
In this respect, HP clearly sees IBM as the role model. The move to higher margin services is clearly right but what does HP do with its ‘commodity’ hardware lines in the future? We should all remember that IBM sold both its PC business to Lenovo and divested its own Printer and Imaging operations. Is it beyond the realms of fantasy to even suggest HP might go down that path?
But it was Hurd’s outlook statement which sent HP’s shares down 5% in after-hours trading. He guided analysts to a c5% revenue decline in Q3 – much greater than had previously been forecast saying that he needed another quarter at least to determine whether the global recession had bottomed. We think it will take at least another year before we see growth again in the overall IT market. But there is great opportunity (or threat) for major diversity in the various sub-sectors that HP addresses.
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