Not quite a year on the job, Hewlett-Packard CEO Leo Apotheker lowered expectations for investors Tuesday while dealing with the fallout of a leaked email warning about a tough quarter.
This hans't turned out to be a good week for Apotheker, but better days are likely at HP's big user conference in early June. That's because business users, especially those who buy hardware and software from HP, are keeping the company's financials in good shape. Those users will be at next month's conference by the thousands.
In between HP's expected pitches around its cloud strategy and the technical sessions, Paul McCartney is expected to perform a concert for conference attendees.
HP and McCartney are already familiar. Last year, HP announced that it had reached an agreement with McCartney's company to digitize his music library and make it available through a private cloud. It's not known what set of songs McCartney intends to play, but an audience of HP customers may be Twittering for hidden messages and a double entendre or two in the lyrics.
With this mind, we've taken some liberties to anticipate how McCartney's lyrics can be used to explain HP's latest earnings.
(Source of lyrics: Lyrics Mania )
And when the cupboard's bare
I'll still find something there with my love - From My Love
Sales of Apple's iPad are hurting PC sales across most vendors; HP is no exception. It's still filling its tablet cupboard, and hopes to win significant market share in this market with the release of its WebOS TouchPad this summer.
In its Personal Systems Group, which includes PCs, consumer client spending declined 23% last quarter, but business users remain true to HP, and commercial client customer spending was up 13%. Overall Personal System Group revenue declined 5%.
Nobody knows, ooh-uh-ih - From Nobody Knows
Wall Street's focus on HP's shortfall in the consumer market seemed to overshadow its performance with business customers.
Andrew Bartels, an analyst at Forrester, points out that about two-thirds of HP's revenue comes from its business customers. "HP is seen as a consumer vendor, erroneously," said Bartels. "Because it is still seen as a consumer vendor, it is being hurt worse than it deserves," he said.
Well the Ukraine girls really knock me out,
They leave the west behind.
And Moscow girls make me sing and shout,
That Georgia's always on my my my my my my my my my mind - From Back in the USSR
According to Bartels, about 70% of HP's corporate market revenue from PCs, servers and storage is from overseas, "and with the dollar being significantly down that is going to give a boost to their revenues in dollars." HP's revenue was $31.6 billion for the quarter, up 3% from the prior year.
I love you, I love you, I love you.
That's all I want to say.
Until I find a way,
I will say the only words I know that
You'll understand. - From Michelle
Michelle may not be exactly the song Apotheker would sing to his predecessor Mark Hurd, but we do know that the former CEO is on his mind.
HP services revenue grew 2% year over year, and HP is planning on "accelerating alignment of the services business with the company's overall strategy," to higher value services. Apotheker told investors this week that this is something that should have been done in the past.
Everybody gonna dance tonight
Everybody gonna feel alright - From Dance Tonight
Businesses are still spending on new systems. HP's enterprise servers, storage and networking revenue grew 15% year over year, and its software revenue was up 17%.
"The corporate market is still looking strong, in fact stronger than we expected for the hardware piece of it," said Bartels, who believes it will slow once post-recession upgrades and restocking are complete.
Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His e-mail address is firstname.lastname@example.org .
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