Hurd's first quarter succeeds, except in support
February 16, 2006
HP reported its 2006 first quarter results late yesterday, after the markets had closed, numbers that had investors buying up the stock this morning. HP says it's on its way to its first $90 billion sales year. But the only dark spot on an otherwise glimmering rebound picture shows HP 3000 customers why they've gotten two extra years to migrate. At least it gives good financial motive for HP's move.
While the enterprise storage and servers segment saw a healthy 5 percent jump in revenues, the other end of the 3000 customer's HP lifeline looked a bit frayed. HP Services revenue took a slight 2 percent decline over 2005's Q1. HP noted that if you accounted for the value of currency, revenues were actually up by 3 percent.
For argument's sake, let's call HP support revenues absolutely flat. It still represents a data point that HP wants to avoid. See, even with sales of support down, the group still reported $12 million more in profits. Support is a high-profit business, especially for servers like yours with a legendary uptime record among HP products.
By my analysis, the numbers represent the reason your calendar for leaving the platform (if you're leaving) just got pushed back to end of 2008. By anyone's accounting, support for the 3000 customer must be among the most profitable in the Services stable. Turn that off at the end of this year, like HP intended to do, and it would walk away from millions of dollars of income.
And so your relationship with HP is extended, if you're buying your support from the vendor. Enterprise business at HP, where the vendor hopes you will spend your money by migrating, showed a profit increase of $260 million, the second straight quarter of significant black ink for a group selling servers to replace your 3000s.
Details for those of you moving toward HP-UX and Integrity servers: Both saw stronger sales for the period. HP-UX revenue rose 2 percent from 2005's Q1. Integrity revenues nearly doubled from last year's Q1, and now make up 30 percent of Business Critical Server revenues. HP's fallen short of its "Itanium makes up half" goal, but the servers are up from about 16 percent one year ago. You can hardly buy a PA-RISC server anymore from HP, unless you insist. But apparently there's still a lot of insisting.
You can have a look at HP's financial details, if you like that sort of thing, in a PDF file from the company Web site.
Of course, printers contributed more than half of HP's profit for the period, another verse in a song so dear to your hardware supplier's heart. HP's CEO Mark Hurd — who the Wall Street Journal said was getting his first report card with this quarter's numbers — said the great quarter came from efficiency and streamlining your company.
"Growth was balanced across most of our businesses and geographies," he said in HP's press release, "Cash flow was strong and we were disciplined in controlling costs. While hard work remains ahead of us, our efforts are starting to show results."
HP posted its second-ever $22 billion sales quarter, following 2005's Q4, with profits of $1.7 billion. The period represented the first time that HP has had to tell analysts that sales results would be on an uptick if measured in constant currency. In reported dollars, the growth rate fell for the second straight period.
Forecasts for the company's Q2 came in ahead of expectations, as did reported profits for Q1. The result saw HP's share price rise up beyond $32 — a mark the company's stock has not seen since the summer of 2001, when HP decided to curtail its HP 3000 business. Just a coincidence there, but better times for most of HP's customers, including those still purchasing HP support.