Mixed Financials

Hewlett-Packard Co. (HP) reported strong first quarter results while Dell Inc. posted mixed results for its second quarter. In other financial news, Novell Inc. saw mixed results as it continues its shift to Linux while Teradata Corp. posted good gains for its quarter.

 

Focal Points:

• HP released its financial results for its first quarter of fiscal 2010. Net revenues for the quarter were $31.2 billion, a gain of eight percent from the same period in the previous year when it had revenues of $28.8 billion. On a GAAP basis, net income for the quarter surged 25 percent from last year's quarter of $1.86 billion to $2.32 billion. The Enterprise Storage and Servers (ESS) division reported total revenues of $4.4 billion, up 11 percent. Industry Standard Server (ISS) revenues increased 27 percent while storage revenues declined 3 percent with the midrange EVA storage product line down 5 percent. Business Critical Systems (BCS) revenues dropped 22 percent, while ESS blade revenues were up 24 percent. HP Services was the only major HP division to suffer a decline – its revenues fell one percent even as the division got more profitable. Personal Systems Group (PSG) posted a 26 percent increase in unit shipments and saw an increase of 20 percent in revenues to $10.6 billion. HP Software revenues were flat while the Imaging and Printing Group (IPG) revenues increased 4 percent and HPFS revenues climbed 13 percent.
• Dell posted its financial results for its fourth quarter of fiscal 2010. Net revenues for the quarter were $14.9 billion, an increase of 11 percent from the same period in the previous year when it had revenues of $13.4 billion. On a GAAP basis, net income for the quarter shrank five percent from last year's quarter of $351 million to $334 million. While its competitors have sold more desktop computers, Dell saw its desktop sales fall in the fourth quarter. On the notebook side HP reported a 25 percent increase in sales whereas Dell only saw an increase of 16 percent. Mobility and servers and networking saw double digit growth on a year-over-year basis. For the full fiscal year Dell had net revenues of $52.9 billion, a decline of 13 percent from the previous year when it had revenues of $61.1 billion. Net income for the year was $1.43 billion, a decline of 42 percent from its 2009 year when it recorded a net income of $2.48 billion. 
• Novell reported revenues for its first quarter of fiscal 2010. Total revenues for the quarter came to $202.4 million, down 5.8 percent, with software license sales plummeting 25 per cent to $21.2 million. The decline was largely due to a decline of NetWare revenues. Maintenance and subscription revenues were up slightly to $158.9 million while services sales fell by 20 percent to $22.2 million. Maintenance and subscription revenues for SUSE Linux products accounted for $37.5 million in revenues, up 6.4 percent compared to a weak first quarter of fiscal 2009. However, Linux invoicing was up 75 percent over the reporting same periods. According to executives, the SUSE Linux business was at break-even, which was defined as "a significant milestone."
• Teradata posted its fourth quarter and fiscal year 2009 results. Net revenues for the quarter were $496 million, a slight increase of one percent from the previous year's quarter of $493 million. On a GAAP basis, net income for the quarter was $84 million, an increase of six percent from the previous year's quarter of $79 million. For the full fiscal year Teradata reported revenues of $1.71 billion, a decline of three percent from the prior year's revenue of $1.76 billion. Net income for the fiscal year was $254 million, a two percent gain from the prior year's income of $250 million.  

 

Experton Group believes 2010 will be an investment year for corporations but due to capital constraints executives will be very aggressive and selective in their pursuit of new equipment. On the corporate front, HP continues to experience problems with its BCS sales, which includes the Integrity line of servers, and midrange storage products. Dell continues to struggle with market share in the commercial space and therefore has given deeper discounts on sales than desired and projected. Although Novell's SUSE Linux has reached a critical milestone, it still has a ways to go before it can catch up to Red Hat Inc. On the other hand, Teradata has demonstrated that it can hold its own, despite the pressure from IBM Corp., Oracle Corp. and others. IT executives staff should take advantage of the current competitive and economic environments to gain greater contract, price and service level concessions from vendors. IT executives should also work with their vendors' financial services arms or providers to find creative financial solutions that can satisfy their capital acquisition constraints.