HP on a roll, but challenges await in 2009

Weakening economy, uncertainty over EDS acquisition will challenge HP

HP has been remarkably successful in a difficult financial time, but keeping up the pace in 2009 will be tough.

HP last month reported fourth quarter net revenue of US$33.6 billion, a 19 percent year-over-year increase, or 16 percent after adjusting for currency fluctuations. Forrester Research analyst Andrew Bartels credits HP with expanding and deepening its market presence in both services and software.

"In that sense, it's kind of following the path that IBM has blazed of moving out of hardware, which is under more price pressure," Bartels says.

Secondly, Bartels says HP has done well in the consumer market with personal desktops, and this has helped the company ride out some disappointing earnings in its servers and storage business.

Despite 13 percent growth in storage revenue, the overall storage and server division reported total fourth quarter revenue of US$5.1 billion, down 1 percent from the previous year. While faring well in the blade server market, HP has struggled with sales of industry standard and business critical servers, following a trend which recently saw the worldwide server market post its largest decline since 2002. Moves toward cloud computing and virtualization are harming server sales throughout the market, Bartels notes.

HP itself predicts great financial challenges in 2009.  The company says unfavorable currency exchange rates will likely drag down its fiscal 2009 revenue by five percentage points in its first quarter and six to seven percentage points over the year. The U.S. dollar has gained strength as of late against currencies such as the euro and British pound. More than two-thirds of HP's fourth quarter revenue came from outside the United States.

The economy's impact on customer spending also will no doubt take a toll.

"We don't know how the economy will evolve, but at this point we are expecting the market to be challenging in '09, particularly for discretionary IT spending," HP CFO Cathie Lesjak said during a November earnings call. "As a result, we are trimming our revenue outlook relative to typical seasonality."

HP could see trouble if consumer spending slows down for an extended period, Bartels says. He is also disappointed in the results of the HP-EDS acquisition, which HP pulled off for US$13.9 billion this year. HP and EDS consulting revenues are now lower than the combined sum of the two companies before the acquisition, he says.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags HP

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jon Brodkin

Network World
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers

MSI P65

This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang

MSI GT76

It really doesn’t get more “gaming laptop” than this.

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?