Hurd Embraces Channel As HP 4th Quarter Is Mixed Bag

Hewlett-Packard president and CEO Mark Hurd said he is not looking to shift more business direct and that the company's recently streamlined channel programs should yield more positive results for the company and partners that are committed to HP.

"We do get the question a fair amount: 'Are you going all direct?'" Hurd said in answer to an analyst's question during HP's fourth-quarter earnings call Thursday evening. "That's not our situation at all. We're trying to focus on getting into partnerships that really are aligned around where we want to take the company."

Overall, it was a mixed bag for HP, which reported that revenues of $22.9 billion were up 7 percent for its fourth fiscal quarter ended October 31. PC, and enterprise-server and storage sales were strong, although the company's printing and imaging business profits were down despite a modest increase in revenue.

A $1.1 billion restructuring charge toppled earnings by 62 percent, with net income of $400 million. Without the charge, net income would have increased 22 percent.

HP's PC business grew 9 percent to $7.1 billion with unit shipments up 13 percent. While its desktop business was up only 1 percent, notebooks increased 23 percent. Personal Systems Group profits were $200 million, representing 2.8 percent of revenue, compared with $77 million or 1.2 percent of revenue last year.

Hurd declined to take credit for the PC unit's growth, noting it has incrementally improved over the last few years.

"We expect this business to continue to perform," Hurd said.

While imaging and printing revenue was $6.8 billion, up 4 percent over the same period last year, profits declined to $896 million or 13.2 percent of revenue, from a profit last year of $1.1 billion or 16.6 percent of revenue.

Enterprise servers and storage (ESS) continued to rebound this quarter, with revenue of $4.5 billion, up 10 percent year-over-year. Industry-standard server revenue increased 12 percent, networked storage grew 17 percent, and business-critical system revenue dropped 1 percent.

ESS profits soared to $405 million, or 9.1 percent of revenue, up from $100 million, or 2.5 percent of revenue, in the clearest sign yet that the enterprise business, which was until last year beleaguered, may be finally on the mend.

"We grew revenue, we were more disciplined in our approach to dealing with pricing, and we were prudent in how we dealt with our expense structure," Hurd said. "We were just tighter with the buck."

Also worth noting, HP's software business is in the black for the first time. Revenue of $311 million represented an increase of 11 percent growth, with OpenView sales up 13 percent and profits of $27 million, compared with a loss of $7 million year-over-year.

For the first quarter of the new fiscal year, HP is forecasting revenue ranging from $22.3 billion to 22.6 billion and for the year, $89.5 billion to $91.5 billion.

With regard to the company's staff reductions, announced in July, so far 4,700 employees have left the company. Hurd said another 800 positions will be cut, bringing the total to 15,300.

Overall investors reacted positively to the report and forecast pushing shares up 6 percent in after-hours trading, hitting above the $30 per-share threshold.