HP revenues down, CEO says 2014 growth unlikely
HP sees revenue down 8%, income up to $1.39 billion
HP has posted a larger drop in revenue than expected for its fiscal third quarter, and predicted no growth in revenue for 2014 as the company struggles in weak PC market and poor performance in its enterprise division.
The company reported an 8% drop in revenue for the quarter ended 31st July, to $27.2 billion. Net income for the quarter came to $1.39 billion, reversing a loss of $8.9bn during the same period last year.
HP president and CEO Meg Whitman said in an analyst call to announce the results that revenue growth was "unlikely" in 2014. The company also announced that it would move two key executives, with COO Bill Veghte taking control of the Enterprise Group.
Whitman said that she was confident the company was still on track with its turnaround plans, and that the company was seeing significant improvement in our operations, balance sheet and cost structure.
HP's Enterprise Group saw revenue decline by 9% year-on-year, with Networking revenue flat, Industry Standard Servers revenue down 11%, Business Critical Systems revenue down 26%, Storage revenue down 10% and Technology Services revenue down 7%.
In the Personal Systems group (PC), revenue was down 11% year over year, with Commercial revenue down 3% and Consumer revenue down 22%. Total units were down 8% with Desktops units down 9% and Notebooks units down 14%.
The printing, enterprise services and financial services divisions all posted revenue drops, while software revenue was up 1%.
Veghte will replace replacing Dave Donatelli as head of the Enterprise division, HP's second-largest business division. Donatelli will now focus on identifying early-stage technologies for investment, the company said.
"Bill's vision for the future of IT, his breadth of experience in the industry and at HP, and his deep enterprise experience, make him the ideal candidate to help HP navigate a rapidly changing market," said Whitman. "Dave succeeded in pioneering converged infrastructure, bridging servers, storage and networking. Looking forward, the software-defined data centre and cloud computing offers us a great opportunity to extend HP's leadership in the technology infrastructure space."
Jack Narcotta, an analyst with the Computing Group of Technology Business Research Inc (TBR) said that despite HP's diverse revenue streams, it has still seen sequentially declining revenue in every quarter for more than a year. With over 300,000 employees the company can maintain profitability by cutting headcount, but it still need to increase non-PC and server business and prove the value of its wider portfolio of software and data centre offerings in the face of competition from more mature rivals.
"The strategies implemented by CEO Meg Whitman and her executive team have not provided remedy to triage shrinking market share and declining revenues," Narcotta said. "HP has yet to prove it can grow its non-PC and server business to offset staunch declines in those two industries, and a hyper-competitive pricing environment that will persist through 2014 will limit HP's ability to rebound from its downward growth trajectory."