HP's Results: Mixed News for Partners
HP (NYSE:HPQ) announced lack-luster results on August 18. Sales year over year for the quarter were down 2.1% to $27.5 B and profits were down 19%. Almost all divisions seemed to reflect the economic malaise. Sales in Europe were particularly challenging. However, like IBM, services were a bright spot and have had a positive impact on profitability. The services profit margin was 15%, up from 13% a year earlier. This division contributed about a third of the company's profits during the quarter.
The good news for HP is that it continues to gain market share in PCs and servers. Fortunately, HP has not been aggressively lowering prices to fend off rivals such as Acer and Dell. However that may well change, particularly in the server arena. Oracle's purchase of Sun Microsystems was just approved by the U.S. government. The server wars are about to heat up and aggressive pricing is to be expected.
There are several bits of good news for partners in all this. HP's unit sales continue to be strong for PC's. Unit shipments actually grew 2%, and HP continues to hold a very strong position in servers. Demand for these two key enterprise products has been building for some time now and will eventually be unleashed. Mark Hurd stated he was encouraged by the stability he's seen in the market. So, HP's channel partners can expect stable, if not improved, corporate sales in the near term. However, partners should watch out for price erosion as competition intensifies.