Rough Quarter Has HP Partners On Alert

First-quarter revenue declined in the double digits for three of HP's main business segments with only its IT services unit outperforming the year-ago period, the Palo Alto, Calif.-based computing giant reported Wednesday. Shoberg, who said he listened to that earnings call and read HP's first-quarter report cover-to-cover, came away with a sense of the potential depth and length of the current economic downturn.

"I didn't walk away with a sense of panic. I walked away with the sense that I have a whole lot less margin of error than I've ever had, but that I still have the ability to execute," he said, adding that his trust in HP CEO Mark Hurd and the vendor's PartnerOne channel program remained solid.

If HP's first-quarter numbers were sobering, the vendor's outlook for the rest of 2009 was downright bleak. HP is projecting a drop in revenue of 2 percent to 5 percent for the full year, as compared to 2008.

Hurd on Wednesday emphasized HP's commitment to execution during the recession, singling out the ahead-of-schedule integration of recent acquisition Electronic Data Services (EDS) as an example of that commitment paying off. HP Services grew its year-over-year sales 116 percent in the first quarter largely due to the addition of EDS, which HP acquired in mid-2008.

Shoberg said IT services could provide "an aspirin" for the pain of hardware refresh cycles grinding to a halt at many of the companies and organizations that HP Elite Partners like Works Computing count as customers. But he cautioned against banking on a healthy, even growing, services practice to make up for all of the other revenue streams that have been shrinking in recent months.

"I don't think services can do it by itself, but it sure can soften the pain," he said.

HP's diversified portfolio and prudent stockpiling of cash during better times continued to impress Shoberg, a sentiment shared by Denali Advanced Integration's John Convery.

"HP's obviously a key bellwether as to what's going on [in the IT industry]. They're not our only vendor, but they are our most strategic partner," said Convery, executive vice president of marketing and vendor relations at Denali, a Redmond, Wash.-based IT reseller.

Convery said he expected HP to "stick to its knitting" in the coming months and focus on core competencies, expense control and the channel partner relationships that have made the vendor the world's largest IT company in terms of revenue. That's precisely what his own company plans to do, he said, and Convery hopes HP won't hesitate to lean on Elite Partners like Denali for support during these lean times.

"HP PartnerOne is still best-in-class. We love HP, the zero-percent financing, the green initiatives. We have a robust IT print practice that gets us in the door on a lot of accounts," he said.

"But as [HP North American channel chief] Adrian Jones and Mark Hurd say, this is a unique time. What it's not, is it's not a time to not invest in technology. But you've got to pick your battles, and as HP goes forward, they need to tap the Elite Partners who they know can carry the bucket for them, who've proven they can do that."

Both Convery and Shoberg pointed to the federal government's recently passed economic stimulus package as a potential source of major business opportunities for themselves and for HP, but were hesitant to get too particular about the plan before spending details were better known.