On the day the Dow Jones Industrial Average reached a record pinnacle, Hewlett-Packard released quarterly results that pushed the company's stock down 10 percent.
HP is no longer in the Dow, a revision that the New York Stock Exchange made last year. HP is revising its organization this year in preparing to split in two by October. The numbers from HP's Q1 of 2015 indicate the split can't happen soon enough for the maker of servers targeted to replace HP 3000s. The company is marching toward a future more focused on enterprise systems -- but like a trooper on a hard course, HP fell out during the last 90 days.
HP said that the weakness in the US Dollar accounted for its overall 5 percent drop in sales compared to last year's first quarter. Sales would have only fallen 2 percent on a constant-currency basis, the company said. It mentioned the word "currency" 55 times in just its prepared marks of an earnings conference call this week. The 26.8 billion in sales were off by $1.3 billion on the quarter, a period where HP managed to post $1.7 billion in pre-tax earnings.
That $1.7 billion is a far cry from Apple's $18 billion in its latest quarter profits. HP's arch-rival IBM is partnering with Apple on enterprise-caliber deals.
Meanwhile, the still-combined Hewlett-Packard has rolled from stalled to declining over the last 18 months, which represents some of the reason for its bold move to split itself. "Enterprise trends are set to remain lackluster absent a transformative acquisition," said one analyst while speaking to MarketWatch this week. Two-thirds of the $5.5 billion in Printing came from supplies. Ink is still king in the printing group
Industry Standard Systems (Intel-based Windows servers) provided the lone uptick in the report. Sales of products such as the newest Gen9 ProLiants lifted the revenues up 7 percent compared to the Q1 of 2014. HP is ready to take advantage of upcoming rollovers in Windows Server installations.
BCS results have been so consistently poor that HP considered that 9 percent drop a good sign. "We also saw some recovery in business-critical systems," said CFO Cathie Lesjak, "with revenue down only 7 percent in constant currency or 9 percent as reported."
Lesjak pointed out to the analysts on its conference call that hardware such as the Integrity HP-UX servers are vulnerable to the value of the US Dollar.
Our personal systems and our Enterprise Group hardware businesses have very little in natural hedges, as our component contracts are typically in US dollars. As a result, these businesses are disproportionately impacted by currency movements. However, we do have some ability to increase pricing in response to currency movements, while being mindful of competition and potential negative impacts to customer demand.
HP is expecting all of the 2015 hardware growth in the Enterprise Group to come from its Gen9 lineup of ProLiant systems. Windows Server 2003 has an expiration date for its support coming up in July, an event that HP believes will give it some fresh wind in its enterprise sales.
"I think we are really well positioned to take advantage of Windows 2003 refresh, just as we were from the XP migration and the PC business," said CEO Meg Whitman. "I think we feel really pretty good about that business for the reminder of the year. And I think we are very well positioned .and the Gen9 server was dead-on, from the market perspective."