Annex Bulletin 2012-03                              February 22, 2012

A partially OPEN edition



Oracle Runs Out of Oracles (Analysis of latest quarterly results)



Updated 2/22/12, 11:30AM HST

Analysis of Hewlett-Packard's First Quarter FY12 Business Results

Waning of PC Era Hurts HP

PC Sales Drop 15%, Earnings Plummet 40%; No New Game Plan in Sight

HAIKU, Maui, Feb 22, 2012 - The world's second largest computer company just got smaller.  Hewlett-Packard reported its first quarter FY 2012 earnings a few minutes ago and the picture is not pretty.  Revenues are down 7% to $30 billion, driven by double-digit declines in PC (-15%) and in Enterprise servers (-10%) businesses, and a 7% drop in its "cash cow," the Imaging and Printing unit.  As a result, net earnings plummeted 44% while operating margin slipped 3.7 points.  Ouch.

So what does it all mean?  That the new CEO Meg Whitman is unable to right the listing ship?  Yes and no. When shrinkages become so widespread as they are in HP, NOBODY can right a listing ship that quickly. Not any more that you could expect such miracles in the case of "Costa Concordia" (still stuck on the rocks in Italy):

When Meg Whitman was named new CEO the last August, we said that she "will probably need to jump through some incredibly high hoops in order to regain Wall Street's confidence. She failed to do that in the political arena three years ago (left) as had another former HP CEO, Carly Fiorina.  Well, that's one thing the two ladies have in common." FAILURE.

In other words, it would have taken a miracle to turn HP around that fast.  Well, miracles did not happen. And the latest results show it.

Last year, HP suffered the humiliation of having Apple surpass it as the world's largest computer company.  In 2012, with Apple growing through the roof and HP shrinking, the gap between the two is widening. But the numbers merely mirror the big picture changes that are taking place.

Apple is a company that has been able to reinvent itself over and over again.  Big Blue is another company that has shown such ability over an even longer period of time (Apple is 36 years old, IBM is 101). HP, on the other hand, has the feet of clay.  It is still stuck on the past... the PC era, the printing hardware, the decaying server product lines...

So the latest numbers merely reflect for all to see how the waning of the era of PCs and hardware is exposing the companies with clay feet who are still stuck in the past.

We do not envy the HP shareholders anymore than we envy the Carnival Cruise lines owners.  Both will have to come up with a new game plan... QUICKLY.  Or sink.

Which is what the HP stock did today.  It dropped like a rock, down 6.5%.  HP shares are down 38% since a year ago.  Ouch.

* * *

SEGMENT HIGHLIGHTS: The company in the January quarter showed weakness across a range of geographies and product groups:

  • Americas revenue was down 9%, or 8% adjusted for currency.

  • EMEA was down 4%, or 5% adjusted for currency.

  • Asia-Pacific was down 10%, or 12% adjusted for currency.

  • Commercial businesses together were down 4%

  • Consumer businesses were off 23%.

  • Personal systems group, the PC unit, was down 15%. Commercial client revenue was off 7%; consumer client was off 25%; workstations were flat. Total units were down 18%, with a 19% drop in desktop units and an 18% decline in notebook units.

  • Services revenue was up 1%.

  • Imaging and printing group revenue was down 7%.

  • Enterprise servers, storage and networking was down 10%. Networking was flat, industry standard servers was down 11%, business critical systems was down 27% and storage was down 6%.

Have a nice day.

Happy bargain hunting

Bob Djurdjevic

Volume XXVIII, Annex Bulletin 2012-03
February 22, 2012

Bob Djurdjevic, Editor

(c) Copyright 2012 by Annex Research, Inc. All rights reserved.
The copyright-protected information contained in the ANNEX BULLETINS is part of the Comprehensive Market Service (CMS).  Reproduction by any means is prohibited..

Home | Headlines | Annex Bulletins | Index 1993-2012 | Special Reports | About Founder | SearchFeedbackClips | Activism | Client quotes | Speeches | Columns | Subscribe

Happy Birthday, IBM! (IBM to turn 100 on June 16; what's the secret of its success?)

Apple Falls from Tree to Cloud, Then to Earth... with a Thud (Last major holdout joins race to cloud, but falls flat on first attempt)


Annex's 33rd Birthday (May 15, 2011)


Big Blue "Rock of Gibraltar" Stands (Analysis of IBM's first quarter business results)


Wall Street's New "Rock of Gibraltar" (Annual update to our 5-yr IBM forecast)

HP: Ghost of EDS Haunts HP (Analysis of HP's first quarter 2011 business results)

Case Makes a Case for Innovation (Analysis of new "Startup America" program)

HP: New Broom Sweeps Clean (Apotheker fills our first prescription in board shake-up)

IBM: Another Phoenix of the IT Industry , Analysis of IBM's 4Q10 result

One Man's Pain, Another Man's Gain? (Analysis of possible impact of Steve Jobs' health on IBM, Intel, other IT companies)

Consumer Rules (Analysis of top 15 global IT leaders' stock and business performances) 

IBM Hardware to Rise and Shine Again (Analysis of IBM STG business results and outlook)

BARRON's: IBM Shareholders Will Like New Year (Analysis of Barron's article on IBM stock)


HP's "Stealth CEO" Sounds Bullish in First Public Appearance (Analysis of HP's fourth quarter business results)


Silicon Valley Rodeo (Editorial on shenanigans and costly trivial pursuits)


IBM Business Up, Stock Down (Analysis of Big Blue's third quarter business results)