February 2005
HP’s Q1 report showed slight
growth in HP-UX servers
After warning analysts not to ask
about its CEO switch, HP took questions Feb. 16 on its first quarter
2005 results in a one-hour conference call. The numbers included 3
percent sales growth for HP-UX servers, according to Technology
Solutions Group Executive VP Ann Livermore. “This marks the
fourth consecutive quarter of year over year growth,” she said
of HP’s Unix business. But overall numbers for HP’s
Business Critical Systems (BCS), home of HP-UX alternatives for the
3000 as well as the Digital Alpha and NonStop servers, dipped 2
percent on the period. HP’s overall profit for the Enterprise
Storage and Servers unit dropped 53 percent for the period,
reflecting the intense competition with Dell and IBM for server
market share.
The HP Integrity server line,
powered by the Itanium processors HP developed with Intel, now
represents 18 percent of BCS revenues. Integrity sales doubled during
the quarter compared to 2004’s first period. HP wants Integrity
to represent half of its BCS revenues by the end of this calendar
year.
The company’s overall numbers
— $21.5 billion in sales, up from last year’s Q1 revenues
of $19.5 billion — delivered 32 cents per share in earnings,
flat compared to last year’s Q1. The earnings, bogged down by a
$116 million patent settlement with Intergraph, were buoyed by $932
million of imaging and printer group operating profits. Nothing
changed much about this mix of HP’s profits: Imaging and
printers contributed 63 percent of HP’s operating profits for
the quarter. HP Services posted another 20 percent of the
company’s profits, while the company’s software group lost
money for the ninth straight quarter.
Livermore noted that HP profits in
Technical Services, home of its support operations, are expected to
decline in the months and years to come. Services contributes 80
percent of the operating profit in Livermore’s Technology
Solutions Group. She said HP’s services portfolio is moving away
from the more profitable proprietary technical support business (at
one point MPE/iX, and now HP-UX) to the industry standard business
around Windows PCs. She also noted that ProLiant servers are driving
server growth at HP.
To help offset long-term pressure
on its profits, HP spent $60 million last quarter to reduce its
workforce, with more than half of its cuts coming in the enterprise
storage and servers unit. The company will more than double those
reduction expenses in the next quarter, with the majority of the cuts
coming in its enterprise units.
