HP touts Q4 figures in report
November 24, 2008
HP considered the last two months of its fourth quarter as a tough stretch of road. But today the vendor put a bright face on strong financials from that period, toting up record sales for Q4 as well as for for fiscal 2008. CEO Mark Hurd stressed ongoing cost cutting and confidence in the future. But HP's leader said the vendor had to do its work to make sure that Q4 would deliver extra profits as well as the sales increases buoyed by new acquistion EDS.
"These results demonstrate our ability to execute in a challenging market," Hurd said in a conference call and financials presentation with investment analysts. "Great companies excel in tough times, and in tough times customers turn to great companies. "I'm confident in HP's ability to gain share, expand earnings and emerge from the current environment as a stronger force in the marketplace."
While the HP services and support sector is expected to withstand the downturn in the economy, analysts show concern over the hardware-based parts of HP's business such as business servers. Figures from the report show Enterprise Storage and Servers, which delivers HP's 3000 alternatives such as Industry Standard Windows systems and the HP Unix Business Critical Server, saw revenues down 1 percent year to year. The Business Critical Servers revenue dropped 10 percent overall, while Integrity systems sales rose 6 percent.
Integrity now represents 83 percent of BCS revenues. HP blade server revenues, which includes some Integrity systems, rose 33 percent from the same period last year.
HP's services doubled revenues from the prior Q4, figures which in large measure were the result of adding EDS business. Meanwhile, Enterprise Storage and Servers saw its quarterly operating profits fall $31 million from the past year's final quarter. ESS was the only HP unit to show a decline in profits compared to Q4 of 2007.
But earnings per share overall for HP reached a record high at $1.03, when calculated outside of the Generally Accepted Accounting Practices (GAAP). Despite the falling profits at ESS, Hurd said that HP believes it held or gained share in each of its segments.
Hurd said he's confident of HP's financial position, in spite of what he called "macro-economic challenges," for reasons that include continued cost-cutting. "Our company is leaner, and more flexible than ever, and yet we still have more work to do [on cost structure], which is actually good news," he said. "We will be tightening discretionary spending given the environment."
HP also feels confident because one-third of its revenues and more than half of its profits come from "recurring sources such as services and supplies," Hurd said. While the company may be selling fewer systems in the year to come, support contracts for installed hardware look stable, and printers will always need ink and paper. HP is also running the company on 65 percent fewer applications, a simpler platform on which HP can innovate, Hurd said.
"This is a big deal for us. The market is getting tougher and less predictable. That said, an environment like this provides an opening for a company like HP to improve its competitive position. We have every intention of taking advantage of that opportunity."