While it waits to split into two companies, HP is having a bit of tough time, particularly on the enterprise side, although this must be offset against some of the longer term deals it has been winning such as the ten-year Deutsche Bank contract announced earlier this week.
Enterprise services revenue fell 11% yr/yr in FQ1 to $4.99bn, worse than FQ4's 7% drop and contributing to a revenue miss. App/business services and IT outsourcing revenue both fell 11%.Software revenue (high-margin) was also a weak spot, dropping 5% yr/yr to $871m (worse than FQ4's -1%) to thanks to a 16% drop in license revenue (drives future services revenue) SaaS and support revenue was flat, and software services revenue down 7%. Enterprise services sales were hurt by "key account run off and weakness in EMEA," it said on the post-numbers call, while printing (-5%) by weak Russian demand, and software (-5%, with -16% license growth) by "execution challenges and headwinds from [HP's] shift to SaaS."
In the enterprise group, industry Standard Servers revenue was up 7%, Storage revenue was flat, Business Critical Systems revenue was down 9%, Networking revenue was down 11% and Technology Services revenue was down 5%.
Printing revenue, pressured by a long-term shift towards digital content sharing and viewing, was down 5% for the second quarter in a row, and totalled $5.54B. Hardware -4%, supplies -5%.PC division revenue was flat at $8.54bn, with notebook units rising 21% and desktops falling 7%. Enterprise hardware division revenue was flat at $6.98bn - x86 servers +7% (improved from recent quarters), mission-critical servers -9% (also improved), networking -11% (weaker than recent quarters), storage flat, tech services -5%.
It now expects FQ2 EPS of $0.84-$0.88 (below a $0.92 consensus) and FY15 (ends Oct. '15) EPS of $3.53-$3.73 (below a $3.95 consensus). Forex is respectively expected to have a $0.09 and $0.30 impact on FQ2 and FY15 EPS (as many other enterprise tech giants can relate).