Despite Autonomy Turmoil, Software Helps HP Beat Street In Q2

Hewlett Packard is cutting its work force and changing leadership of a key software division, but the company's fiscal second-quarter financial results actually surpassed Wall Street's expectations.

Excluding items, HP reported second-quarter profit of 98 cents per share and revenue of $30.7 billion. The consensus estimate of analysts polled by FactSet Research was 91 cents a share on revenue of $29.9 billion.

HP's Software division was a bright spot, with 22 percent year-over-year revenue growth and a 17.7 operating margin. These results included 7 percent license growth, 17 percent support growth and 72 percent services growth.

[Related: HP's Double Whammy: 27,000 Layoffs, Autonomy Founder Steps Down ]

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However, these figures would have been far more impressive without the "significant decline in license revenue" HP says it saw from information management software vendor Autonomy, which it acquired last August in a controversial $10.3 billion deal.

In HP's second-quarter earnings call Wednesday, CEO Meg Whitman described Autonomy's results as "disappointing" but said HP remains bullish on the long-term prospects for the technology, which allows computers to understand unstructured, or 'human friendly' information -- i.e. emails, Twitter posts, video and audio.

"This is a classic enterprise company scaling challenge, and I have seen this movie before," Whitman said, adding that she dealt with similar situations during her time as CEO of eBay. "When you go from $40 million to $400 million [in sales], it's a whole different ballgame."

HP announced that Mike Lynch, co-founder and CEO of Autonomy and head of HP's Information Management division, will leave HP after a "transitional period." Taking his place will be Bill Veghte, HP's chief strategy officer and executive vice president of HP's software business.

Over the next couple of quarters, HP will improve its sales processes and build closer ties between Autonomy and the HP Enterprise Group, according to Whitman.

"[Autonomy] was a smart acquisition and I feel great about the product," she said. "The opportunity around big data and analytics is absolutely fantastic and it can flow around all of our businesses."

Meanwhile, HP's other business units reported mostly lackluster results.

NEXT: HP Earnings For Printing And Personal Systems, Enterprise Groups And More

In its final quarter as a standalone entity, the Personal Systems Group reported flat revenue year over year with a 5.5 percent operating margin; sales to businesses rose 3 percent while sales to consumers fell 4 percent. HP's Imaging and Printing Group (IPG) revenue declined 10 percent year over year with a 13.2 percent operating margin.

HP in March combined PSG and IPG into a new group called the Printing and Personal Systems group, and Whitman said that so far the merger is "going very well," particularly in terms of supply chain synergies.

Revenue for HP's Enterprise Servers, Storage and Networking (ESSN) division, which is now part of HP's Enterprise group, dropped 6 percent year over year with an 11.2 percent operating margin. Business Critical Systems revenue fell 23 percent, following a downward trend spanning several quarters that HP executives have attributed to Oracle's decision to halt Itanium development.

HP Services revenue dropped 1 percent year over year with an 11.3 percent operating margin.

HP remains cautious about the global IT spending environment, and the company is forecasting earnings per share of 94 to 97 cents for its upcoming fiscal third quarter.

As a result of the cost savings HP is expecting from the layoffs, early retirement and other restructuring, the company is bumping up its full-year earnings per share from $4 to between $4.05 and $4.10.