HP posted a surprising improvement in PC sales, saying the looming end-of-life of XP was encouraging enterprises to upgrade.
In the midst of a multi-year turnaround effort intended to revive growth, HP is trying to reduce its reliance on PCs and move toward computing equipment and networking gear for enterprises.
The company broke its losing streak in its PC-focused personal system group with a 4% gain in revenue.
CEO Meg Whitman told analysts that the company saw corporations and agencies beginning to replace ageing computers in the quarter, while Microsoft’s decision to soon end support for Windows XP also prompted PC upgrades.
It’s a knife fight every single day out there, but we feel we’ve got the right ammunition
Business at its enterprise group, the lynchpin of HP’s strategy to transform itself into an IBM-like provider of enterprise computing services, edged 1% higher as server sales fared better than analysts had expected. Whitman said growth in revenue and operating margins in that crucial division was “possible,” provided demand from enterprises holds up.
Please with progress
Whitman, who took the helm of the HP more than a year ago, has said she expects revenue to stabilise in 2014, with some areas of growth for the company.
Whitman stuck to that outlook and told Reuters she was upbeat on HP’s European business as the developed part of that region stabilised, and she said she saw strength in emerging markets like India and Mexico. She added that HP’s business in China stayed largely flat, better than competitors had fared.
“Pleased with the progress, more work to be done,” Whitman summarised for Reuters in an interview.
“It’s a battle. It’s a knife fight every single day out there, but we feel we’ve got the right ammunition,” she told analysts later.
For the first quarter, HP posted revenue of $28.2 billion, down slightly from $28.4 billion a year earlier and beating expectations for about $27.2 billion.
“They’re in a strong position to do well this year, but it also shows the continued challenges in their enterprise business, their software business,” said Shannon Cross of Cross Research. “They’re clearly not done in terms of improving.”
The company posted a 16% rise net earnings of $1.4 billion in the first quarter, compared to $1.2 billion a year ago.
“HP is in a stronger position today than we’ve been in quite some time,” Whitman said in a statement.
“Rest assured, we’re not taking our foot off the pedal,” she told analysts later on a conference call. “We have a lot of work ahead of us.”
Caution
Investors have been cautious on the outlook for computing companies after IBM posted disappointing results, in part because of slowing corporate and emerging markets demand, and a backlash against US corporations in China over revelations of US spying activity abroad.
Cisco Systems, a rival in networking equipment, forecast a 6% to 8% decline in revenue this quarter.
HP has battled IBM as well as now-private Dell and China’s Lenovo in trying to win business from enterprises migrating to the cloud, or remote computing services.
Whitman said Lenovo’s imminent purchase of IBM’s low-end server division presented an opportunity for HP to try and win market share, especially in the near term, given that customers tended to avoid uncertainty about a supplier’s product roadmap.
“We have a near-term opportunity to gain share in our server business. We’re all over it with our channel partners,” she said. But “in the long term, Lenovo is going to be a powerful competitor.”
Disclaimer: Some pages on this site may include an affiliate link. This does not effect our editorial in any way.
