New HP CEO Signals Software Offensive In Wake Of Strong Q4 Results

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Even as Hewlett-Packard posted better than expected fourth quarter results and raised its outlook for 2011, new HP CEO Leo Apotheker Monday left little doubt that he is laser-focused on increasing the company's software sales.

Noting that the software business only accounted for about 3 percent of HP's $126 billion in sales for the fiscal year ended Oct. 31, Apotheker said the HP management team is united in the view that the company needs a "viable" and "vibrant" software business. "Doubling it wouldn't be too bad," said Apotheker in a conference call with reporters. "Tripling it would be even better!

"We need more software both as a category and also across the portfolio so that we can differentiate our individual products and services," said Apotheker. "We have an opportunity to better integrate our software and services strength across the company and we will be focusing on that."

Apotheker's remarks came after HP posted non-GAAP diluted earnings per share of $1.33 for the fourth fiscal quarter ended Oct. 31 on an eight percent increase in sales to $33.3 billion. The Wall Street consensus was earnings of $1.27 per share on sales of $32.75 billion, according to a survey of analysts by Thomson Reuters First Call.

HP shares were up 3 percent or $1.46 in after hours trading to $44.67. HP shares closed Monday up 2 percent or 76 cents per share to $43.25.

HP's networking battle against market leader Cisco in the wake of its acquisition last year of 3Com paid off in big sales gains for the computer giant. HP said networking revenue increased a whopping 227 percent overall in the fourth quarter. The company's ProCurve network equipment sales were up 50 percent over the year ago quarter.

HP's Enterprise Storage and Servers (ESS) business reported a strong overall quarter with sales up 25 percent to $5.3 billion. Blade sever revenue was up 51 percent,, while industry standard server revenue increased 32 percent. Even storage sales, which have sometimes lagged, were up 14 percent.

Even with the strong hardware numbers, it was HP's software business, which accounted for only $3.58 billion in sales in the last fiscal year, that Apotheker focused in on several times during the call. "We need to enhance our software IP (intellectual property) across the company to create more differentiation with our products," he said, singling out an HP medical software solution that comprises the Medicaid platform for 22 states.

"We have many options available to us (to grow software sales)," added Apotheker, who spent 20 years at ERP software giant SAP, in response to a question on whether the company would consider a big bang acquisition in the software market. "We can do some of it organically. We can do some of it non organically.


Next: Ready To Dig Into HP's Technology Portfolio

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