Gartner’s global PC shipment report for the first quarter this year saw shipments in the U.S. fall 3.5% over the year to 15.5 million units. However, the market is relieved considering that Gartner analysts were projecting a fall of 6.1% during the quarter. Despite declining PC sales, HP seems to have walked out stronger. Gartner’s report estimates that HP’s PC shipments grew 6.6% over the year 4.5 million units. They now command 29% of the U.S. market compared with 26.2% a year ago.
HP’s (NASDAQ:HPQ) Q2 revenues fell 3% over the year to $30.7 billion, ahead of the market’s expectations of $29.93 billion. EPS of $0.98 was also ahead of the Street’s target of $0.91.
By segment, Enterprise Servers, Storage & Networking revenues of $5.2 billion were 5.5% lower than the previous year’s revenues of $5.5 billion. Personal Systems Group revenues fell 0.4% to $9.45 billion, and Imaging and Printing Group revenues fell 10% to $6.1 billion. The only marginal growth came from revenues of HP Financial Services, which grew 9.4% over the year to $0.97 billion.
By region, revenue from the Americas remained flat over the year at $13.8 billion, while EMEA revenues fell 7% to $10.9 billion. APAC revenues also dipped 1% to $6 billion.
For the current quarter, HP projected earnings of $0.94-$0.97 per share, which was short of market projections of $1.02.
Earlier this year, HP announced plans to acquire Hiflex, a Germany-based web privately held global software solutions provider. Hiflex’s software focus printing services and deliver web-to-print and management information systems solutions. The move will help HP with their struggling Imaging and Printing division. HP plans to leverage Hiflex’s platform accomplish the goals of their cloud printing strategy.
Meanwhile, there is growing concern that HP’s earlier acquisition of Autonomy at a price of $10.3 billion may not be paying off as expected. HP acquired Autonomy to expand their content management and analytics software presence and to become a more able competitor for Oracle. According to market reports, Autonomy was operating at an annual revenue rate of $1 billion. However, since the purchase, their revenues are estimated to have fallen to nearly $700 million a year. Recently Autonomy’s founder, Mike Lynch, was replaced with Bill Veghte, HP’s chief strategy officer. HP explained that they had to replace Lynch owing to “a very disappointing license revenue quarter with a significant decline year-over-year.”
HP’s R&D Focus
HP’s new CEO, Meg Whitman, has been working on a revamp strategy for HP. Recently, they merged their PC and printer division to cut down on the declining hardware sales revenues. The realignment is expected to cut costs and offer a more focused branding, customer support, and sales team. In addition, management announced its intention to cut 27,000 jobs, or 8% of their workforce, through October 2014. The reduced headcount is estimated to get them savings of $3 billion-$3.5 billion annually. HP plans to cut 9,000 of these jobs by the end of the current year.
HP plans to reinvest these savings in to R&D, which were cut under Mark Hurd’s regime.
For now, Whitman’s moves of cutting costs and investing in R&D have agreed with the market. The company believes that their overhaul is just beginning and the completed picture will take some time to emerge. HP’s stock is trading at $22.33 with a market capitalization of $44.2 billion. It touched a 52-week high of $37.70 in July 2011.