HP says everything's great on financial slate
August 20, 2010
HP entertained 40 minutes of analyst questions last night after it released its Q3 report for 2010. Good news all around, after more than a dozen stock watchers probed the news that HP had pre-released on the day it gave its CEO the gate. Profits are up, sales are up, and only one hand went up in the Q&A asking about Mark Hurd.
Hurd was not the point of the news that HP sold $30.7 billion in products and services in the quarter that ended July 31, or that its profits were $2.3 billion for the period, or that those numbers were up 11.4 and 5 percent from the 2009 quarter, respectively. HP talked about broad-based strength in the quarter, even though growth in Services (that's the EDS part of the business) stalled out at 1 percent.
The story over at the Enterprise Storage and Servers group was cheery in the Industry Standard Server business, the one that sells Intel-based servers like the ProLiant line. Sales up 31 percent there. On the Business Critical Systems front, of course, the message was the only fly in the one-hour conference call. BCS revenues are down 15 percent, including the business wrapped around the HP-UX enterprise systems.
Interim CEO Cathie Lesjak (not Lesjack, as you might be reading in a few dashed off summaries this morning) blamed a new HP server on the BCS decline. That's because the Superdome 2, which probably fits into less than 5 percent of the HP-UX installed base IT footprints, won't ship until September. The server does have a big price footprint, so knowing a better one is in the offing and places like Pella Windows haven't purchased yet could have an impact.
Aside from the BCS bad news, Enterprise Storage and Servers contributed $549 million of profit to HP's Q3 total. Last year, the Q3 business only chipped in $381 million for the same quarter. Blades are cutting the way to the higher numbers. HP said blade revenues were up 29 percent.
The only other place in the HP report that used the word decline, other than BCS, was over in the Technology Services arm of HP's Services group. Sales there down 1 percent. The upside to that services downside was the $1.4 billion in profits HP raked in over at Services for the quarter.
Like it said back on the day it fired Hurd, HP is raising its estimates for the quarter to come and full 2010 fiscal year. It got asked right away if it's investing enough in R&D, and so Executive VP Ann Livermore explained that the ProLiant G7 line, blade system enhancements, HP's smart grid, StoreOnce deduplication software and ProCurve switches are all a result of HP engineering and developing in-house.
HP's Imaging and Printer vice president VJ Joshi addressed the R&D question even sharper. In the space where HP is constantly building rather than buying tech, he said "from an innovation point of view, we are on fire."