HP Sees Revenues Stabilising Says CEO

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Even as HP saw quarterly revenue and earnings fall, HP CEO Mark Hurd said that business seems to be stabilising, particularly in the United States

Hewlett-Packard Chairman and CEO Mark Hurd said the IT business climate is beginning to stabilise, though he stopped short of calling it a recovery.

In a conference call Aug. 18 with analysts and journalists after the company released its fiscal year third-quarter financial numbers, Hurd said HP officials are beginning to see an uptick in business in the United States, though Europe is still a difficult market.

He also said he expects 2010 to be a better year than 2009, though HP will have to get through the second half of this year before seeing a marked improvement in business.

“We’re encouraged by the stabilisation we’re seeing in the market, but not to the point where we can call it a [turnaround],” Hurd said.

HP had a tough third quarter, with revenue falling 2 percent over last year, to $27.5 billion (£17bn), with earnings coming in at $1.6 billion, a 19 percent drop.

However, there were some hopeful signs. While the Personal Systems Group revenues declined 18 percent, to $18.4 billion, the company also saw PC unit shipments increase 2 percent. In addition, HP saw market share in both PCs and industry-standard servers increase more than expected, according to Cathie Lesjak, HP’s chief financial officer.

Hurd credited much of the success in the industry-standard server space to the company’s launch of its ProLiant G6 systems, which are powered by Intel’s new Xeon 5500 Series “Nehalem EP” processors and Advanced Micro Devices’ newest Opteron chips.

Hurd also said that the upcoming quarter was an important one for HP and its competitors, as businesses begin putting together their budgets for the next year. The economy is showing signs of improving, and businesses that have been delaying IT purchases are now beginning to consider refreshing aging systems.

“I think what you’ve seen so far this year is what we’ll see the rest of the year,” Hurd said, adding that next year will be when the industry sees real improvement.

HP is an important indicator of the overall health of the IT market because it touches on many sectors. It’s the top PC vendor in the world, and with its acquisition last year of services vendor EDS, is second to IBM as the number one technology services vendor.

It’s the top printer company, is up there with IBM in server sales and also sells storage devices and software.

HP’s printer business took a hit, with revenue dropping 20 percent, to $5.7 billion. Hurd said part of the reason for the decline was the continued realignment in channel inventory, though revenues in both commercial and consumer printers also dropped. Printer units fell 23 percent.

HP also is aggressively pushing its ProCurve networking business, putting it in tighter competition with Cisco Systems in that space.

Regarding EDS, Hurd said that a lot of the success of the services unit was due the acquisition. Services revenue jumped 93 percent, to $8.5 billion. The integration of the massive services company is going as planned, he said.

Part of that integration is the cutting of 24,700 jobs over three years after the EDS purchase. Earlier this year, HP also said it was cutting another 6,400 jobs.

In its fiscal fourth quarter, HP officials expect revenue to grow 8 percent over the third quarter. For the full fiscal year 2009, Hurd and Lesjak said they expect revenues to come in the midpoint of the prediction made in May, when officials they expected revenue for the year to decline 4 to 5 percent.

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