HP Could Be A Hidden Beneficiary Of Yen Devaluation
Adam Levine-Weinberg • 15 Comments
Adam Levine-Weinberg • 15 Comments
Apr. 27, 2015, 9:46 AM
- Canaccord has downgraded 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) to Hold in the wake of 3D's Friday Q1 warning. UBS and Piper have respectively downgraded 3D to Sell and Underweight.
- Piper's Troy Jensen, who has cut his target all the way to $21, thinks the Q1 warning suggests 3D will have to "materially cut" full-year guidance when it reports on May 6, that its issues are "bigger than the company is communicating," and that "pending competition will prevent the company from rebounding from this depressed competitive state." He provided cautious reseller survey data 3 days before the warning.
- Canaccord, discussing its 3D downgrade: "[G]rowth for professional and production grade printers appears to be slowing. We believe customers are scrutinizing their purchasing decisions more closely following a period of accelerating adoption, especially for non-metal processes. We also think that HP's (NYSE:HPQ) growing marketing presence (no machine until late 2016) is causing some dissonance in the market and is being used as an excuse to delay decisions." The firm thinks Stratasys is affected by slowing industry demand as well.
- Oppenheimer is "grudgingly" keeping an Outperform rating on 3D. "We believe revenue growth is running well below its 'normalized' trend given industry dynamics, and there is great potential for it to bottom and recover ... Valuation is no longer a catalyst, and it will take time to repair the significant (and deserved) reputational damage stemming from recent performance. But we still see the longer term potential as outstripping the risk..."
- Credit Suisse (Neutral): "Management is confident demand will return in subsequent quarters as OEMs have adjusted to the current environment and orders have picked up in Q2; we remain cautious given the recent trend of missed quarterly expectations."
Apr. 21, 2015, 10:06 AM
- Looking to streamline ahead of its PC/printing spinoff, HP (HPQ -0.7%) is selling its Snapfish online photo-printing/storage unit to digital photo fulfillment services firm District Photo for an undisclosed sum. The deal is expected to close in the second half of FY15 (ends in October); Snapfish will continue using HP's printing hardware/software afterwards.
- HP bought Snapfish for over $300M in 2005. Reuters reported last September the IT giant was thinking of selling the unit; Bloomberg reported a month later P-E firms had decided to pass. Rival Shutterfly (SFLY -1.1%), also the subject of M&A rumors, is slightly lower today.
- Separately, HP has announced it's partnering with threat-prevention hardware/software/services leader FireEye (FEYE +3.5%) to deliver "a comprehensive suite of security remediation services underpinned by FireEye's advanced threat detection, intelligence, methodologies and incident response expertise."
- The joint offerings, which will be sold by HP's massive IT services arm, include a global incident response and compromise assessment services from HP and FireEye's Mandiant unit (hired by many firms to probe cyberattacks), and managed threat-protection services that "provide 24/7 security monitoring for indications that a cyber-attack has bypassed traditional technology defenses."
- News of the alliance comes a day after FireEye announced a partnership with firewall vendor/HP rival Check Point. FireEye's Q1 report arrives on April 30.
Apr. 11, 2015, 7:04 PM
- Following an NYT column featuring remarks from exec Bill Hilf that that were taken to suggest HP (NYSE:HPQ) is exiting the public cloud infrastructure (IaaS) market, HP has told CRN it remains committed to the space. However, the IT giant adds (echoing Hilf's remarks) it's "not competing head-to-head with the big public cloud players," such as Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT).
- HP's comments follow the February departure of top cloud exec Marten Mickos (joined via the Eucalyptus acquisition), and the splitting of his responsibilities between Hilf and two other execs. The company entered the public cloud market in 2012, and (like many other enterprise IT firms) has been a backer of the OpenStack IaaS platform (pitched as an open-source alternative to Amazon/Google/Microsoft's proprietary offerings). HP asserts it has the largest OpenStack public cloud in existence.
- HP's stance arguably highlights the challenges traditional enterprise IT names face in countering the cost and scale advantages possessed by IaaS market leaders, who have often eschewed the hardware of IT giants in favor of cheap white-label hardware produced by Asian contract manufacturers. HP has partnered with Taiwan's Foxconnn and Accton to offer white-box gear for cloud providers.
- Synergy Research estimates the broader "cloud infrastructure service" market (covers IaaS and PaaS, as well as private and hybrid clouds) grew 48% in 2014 to $16B, as more on-premise workloads get migrated to cloud environments and various cloud service providers relying on IaaS/PaaS infrastructures see rapid growth. Amazon towered over the space with a near-30% share, close to 3x that of #2 Microsoft. IBM, Google, and Salesforce (NYSE:CRM) rounded out the top 5.
Apr. 9, 2015, 6:03 PM
- As Intel's (NASDAQ:INTC) March 12 warning led many to expect, PC sales were weak in Q1: IDC estimates shipments fell 6.7% Y/Y to 68.5M, a much sharper drop than Q4's 2.4% and Q3/Q2's 1.7%. Gartner estimates shipments fell 5.2% to 71.7M. With IDC also reporting of price pressure, revenue declines might be larger.
- IDC: [T]he Q1 market faced multiple headwinds – including inventory build-up of Windows Bing based notebooks, commercial slow down following the [Windows] XP refresh and constrained demand in many regions due to currency fluctuations and unfavorable economic indicators." Gartner thinks sales of "mobile PCs" (notebooks, convertibles, and Windows tablets) rose, while desktop sales fell sharply. "PC replacements will be driven by thin and light notebooks with tablet functionality."
- Both Gartner and IDC report U.S. PC shipments fell only ~1% Y/Y. On the other hand, IDC thinks Japan (another high-ASP market) saw shipments fall 44%; strong Q1 2014 spending prior to a tax hike made for tough comps.
- Market leaders Lenovo (OTCPK:LNVGY) and HP (NYSE:HPQ) continued taking share from firms with less scale: IDC estimates Lenovo's share rose to 19.6% from 17.6% a year ago (3.4% unit growth), and HP's to 19% from 17.1% (3.3% unit growth).
- #3 Dell's share rose to 13.5% from 13.4%; #4 Asus (OTC:ASUUY) was flat at 7.1%, and #5 Acer (OTC:ASIYF) rose to 7% from 6.3%. Everyone else collectively fell to 33.9% from 38.4%.
- Unlike in Q4 and Q3 (seasonally stronger quarters for the company), Apple (NASDAQ:AAPL) wasn't in the global top-5. IDC estimates the company's US. unit share rose to 10.9% from 10.6%, good for fourth place (revenue share is higher).
- Other PC industry names: MSFT, AMD, NVDA, MU, STX, WDC, HTCH
Apr. 1, 2015, 9:24 AM
- Arguing HP's (NYSE:HPQ) PC/printing spinoff will cause minimal business disruption and that free cash flow will rebound in FY16/FY17 as non-recurring costs go away, Jefferies' James Kisner has upgraded the IT giant to Buy, and hiked his target by $4 to $41.
- Kisner thinks uncertainty about the spinoff and near-term FCF pressures have led HP to be undervalued. Shares trade for just 8.7x an FY15 (ends Oct. '15) EPS consensus of $3.64.
- HP fell hard in February after the company offered light EPS guidance and cut its FCF forecast in tandem with posting FQ1 results. More recently, BofA cut estimates on PC/forex concerns and expected "dis-synergies" related to the spinoff.
- HPQ +1.6% premarket to $31.66.
Mar. 31, 2015, 11:53 AM
- Three years after taking an $8.8B write-down on its $11.1B Autonomy acquisition while levying fraud allegations, HP's (HPQ -0.9%) battle with the enterprise search/indexing software vendor's former leaders is far from over: Autonomy co-founder/ex-CEO Mike Lynch and ex-CFO Sushovan Hussain have been sued for $5.1B over their alleged accounting misdeeds.
- Lynch has responded by promising a counter-suit over an alleged HP "smear campaign" against him and other Autonomy execs.
- Though it's quite unlikely HP will get anything close to a $5.1B payout, a favorable verdict would give the the company more legal/PR cover as it continues dealing the Autonomy acquisition's fallout. The DOJ and the U.K.'s accounting regulator are still probing the deal; the U.K.'s Serious Fraud Office dropped its probe in January.
- Last year, HP paid $57M to settle a shareholder suit regarding the decision-making of ex-CEO Leo Apotheker and his management team (including the Autonomy deal). More recently, a U.S. court approved an Autonomy-related shareholder settlement that doesn't involve monetary payments, but does require HP to make governance changes.
Mar. 27, 2015, 1:44 PM
- Following talks with HP (NYSE:HPQ) IR chief Andrew Simanek, BofA/Merrill's Wamsi Mohan (Buy) has cut his FY15 (ends Oct. '15) and FY16 EPS estimates to $3.59 and $3.46 (below consensus estimates of $3.65 and $3.84), and his target by $3 to $42 (still 35% above current levels).
- Mohan notes weak PC demand and forex are hurting FY15 sales - aside from directly hurting international sales priced in local currencies, forex has allowed Japanese printer rivals to price more aggressively. Regarding PCs, he estimates the average lifecycle of one has risen to 5-5.5 years from 4 years.
- Meanwhile, FY16 estimates have been cut due to expected "dis-synergies" related to the PC/printing spinoff. In-line with HP's guidance, Mohan sees the split taking place by Nov. 1.
- In the wake of the Aruba Networks deal, Mohan thinks more acquisitions are possible, with software (recently struggling) seen as an area of focus. Post-acquisition, HP expects Aruba sales to benefit from the reselling of its hardware by HP's 50K channel partners (dwarfs Aruba's current 6K), and from the ongoing 802.11ac Wi-Fi upgrade cycle.
- Yesterday: HP reportedly near deal to sell 51% of Chinese networking unit
Mar. 26, 2015, 4:29 PM
- HP (NYSE:HPQ) is close to selling a 51% stake in its H3C Technologies Chinese networking hardware unit to state-backed Tsinghua Unigroup, the WSJ reports. Echoing an October report about HP's sale efforts, the paper states H3C is "worth roughly $5 billion in total."
- Sources state a sale might include "a separate server operation," and could still be a few weeks away. Tsinghua is said to be competing with other bidders, including investment firm China Huaxin.
- Tsinghua has bought Chinese chipmakers RDA and Spreadtrum, and since formed a mobile processor partnership with Intel. HP, meanwhile, saw its networking revenue fall 11% Y/Y in the January quarter, something that was blamed on "execution issues" in the U.S. and China. Like other U.S. enterprise IT firms, the NSA scandal has taken a toll on HP's Chinese sales.
- The report comes as HP gets set to acquire enterprise Wi-Fi hardware/software vendor Aruba Networks ahead of a PC/printing spinoff expected to occur by the end of FY15 (ends Oct. '15).
Mar. 19, 2015, 8:27 AM
- Hewlett-Packard (NYSE:HPQ) announces it intention to increase dividend by 10% to $0.176/share in May, resulting in annual yield of 2.13%.
Mar. 13, 2015, 3:21 AM
- In the latest sign of weakening demand for personal computers, International Data Corp. predicts global shipments of PCs will decline 4.9% this year to 293.1M units, a bigger drop than its previous guidance for a 3.3% decrease.
- According to market research firm, the PC market declined 0.8% to $201B last year and is expected to drop an additional 6.9% in 2015, with smaller declines in coming years, reducing the market to $175B by 2019.
- Previously: Intel -4.1% on Q1 warning; other PC industry names also fall (Mar. 12 2015)
- Related stocks: OTC:ASIYF, AMD, HPQ, INTC, OTCPK:LNVGY, MSFT, MU, NVDA, SNE, STX, OTCPK:TOSYY, WDC
Mar. 12, 2015, 1:41 PM
- Predicting a strong dollar will have a big impact on the company's bottom line, Barclays' Ben Reitzes has downgraded Ingram Micro (IM -3.8%) to Equal-weight, and slashed his target by $3 to $26.
- Reitzes notes Europe accounted for 30% of Ingram's 2014 revenue, and that Q4 European sales missed Barclays' estimates in spite of benefiting from an extra week. "Management pointed to aggressive pricing and hits from currency, which materially depressed revenues. We don't see why those trends would abate over the near term, especially with the Euro depreciating further."
- Fellow IT product distributors Tech Data (TECD -5.5%), PC Connection (PCCC -3%), Synnex (SNX -1.9%), and CDW (CDW -1.4%) are also selling off. Tech Data received 60% of its FQ3 sales from Europe; its FQ4 report arrives on March 19.
- Reitzes also downgraded HP (NYSE:HPQ) to Equal-weight on forex concerns, but the tech giant has brushed off the downgrade, as well as Intel's Q1 warning.
Mar. 12, 2015, 9:17 AM
- Intel (NASDAQ:INTC) now expects Q1 revenue of $12.5B-$13.1B, below prior guidance of $13.2B-$14.2B and a $13.7B consensus. Gross margin guidance remains at 60% (+/- 2%), with lower volumes offset by higher ASPs.
- "All other expectations" have been withdrawn - that presumably includes full-year guidance for mid-single digit revenue growth. Guidance will be updated during Intel's April 14 Q1 report.
- The chip giant blames the warning on "weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain." In particular, it thinks "lower than expected Windows XP* refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe," are taking a toll on sales. Server CPU division sales are "meeting expectations."
- Other PC-exposed names are following Intel lower: Microsoft (NASDAQ:MSFT) -2.4% premarket, AMD -2.8%, Nvidia (NASDAQ:NVDA) -2.5%, HP (NYSE:HPQ) -2.3%, Seagate (NASDAQ:STX) -2.5%, Western Digital (NASDAQ:WDC) -2.7%, Micron (NASDAQ:MU) -3.6%.
- Update (11:35AM ET): While Intel is still down over 4%, Micron and Seagate have turned positive, and HP is close to breakeven. Microsoft, Nvidia, and Western Digital have pared their losses, but remain lower.
Mar. 10, 2015, 6:47 PM
- The California federal judge presiding over HP's (NYSE:HPQ) infringement suit against ServiceNow (NYSE:NOW) has invalidated 4 of the 8 patents asserted by HP, arguing they're too abstract to deserve legal protection.
- "We are disappointed in the court’s ruling, and are considering next steps as this is a rapidly evolving area of the law," says HP in response to the ruling. ServiceNow cloud-based IT service desk software has been grabbing share from traditional on-premise market leaders HP, IBM, CA, and BMC.
- The ruling comes less than a year after the Supreme Court set limits on software patents (while upholding software's patentability), declaring companies can't patent a mere abstract idea on a computer.
Mar. 10, 2015, 10:32 AM
- Declaring the company is worth $43/share on a sum-of-the-parts basis and that its PC/printing spinoff will help unlock some of this value, UBS has upgraded HP (HPQ -0.3%) to Buy in the wake of its post-earnings selloff. Shares started the day higher, but are now off slightly thanks to a broad market selloff.
- The upgrade comes as HP launches Cloudline, a family of cheap, dense servers aimed at Web/cloud data centers, many of which have eschewed the offerings of enterprise IT giants in favor of white-label hardware. Cloudline, offered via HP's partnership with Taiwanese contract manufacturer Foxconn, relies on Intel's Grantley CPU line and contains five modular servers optimized for various tasks. HP claims they'll be 10%-25% cheaper than its standard x86 servers.
- Cloudline hardware is meant to work with the white-box switches HP just launched in partnership with Taiwan's Accton. It complements HP's Moonshot server line, which is aimed at enterprises that want to adopt Web-scale architectures but don't want to deal with the do-it-yourself engineering challenges that come with a standard white-label approach.
- Previously: White-label hardware takes more share from IT giants in Q4
Mar. 7, 2015, 3:26 PM
- With Intel's (NASDAQ:INTC) Grantley Xeon CPU launch and Web data center investments offsetting weak high-end server demand, IDC estimates global server revenue rose 1.9% Y/Y in Q4 to $14.5B, and Gartner estimates it rose 2.2% to $14B; those figures compares with Q3 growth estimates of 4.8% and 1.7%, respectively.
- Likewise, IDC estimates global enterprise storage revenue rose 7.2% Y/Y in Q4, aided by Web investments and healthy demand for mid-range systems featuring integrated flash. Q3 growth was pegged at 5.1%.
- IBM had a rough time its both the server and storage markets: IDC believes its storage share fell to 9% (tied for #3) from 12.7% a year earlier, and Gartner estimates its server revenue fell 14% if one excludes Big Blue's x86 server unit, which was just sold to Lenovo. After accounting for the x86 sale, IDC estimates IBM's server share was at 13.7% (#3) vs. 26.8% a year ago.
- HP (NYSE:HPQ) fared a little better: IDC has its server share falling fractionally to 26.8% (still #1 overall), and its storage share falling to 13.8% (#2) from 14.1%. The company's x86 server unit has been gaining ground against IBM's former business, but its high-end server sales remain weak.
- Cisco's (NASDAQ:CSCO) UCS server line (recently refreshed) continues to gain ground: Its share rose to 5.3% (#5) from 4.5%, with full-year revenue pegged at $2.9B. With the help of aggressive pricing and x86 growth, Dell's server share rose to 16.7% (#2) from 15.2%, while its storage share slipped to 9% (tied for #3) from 9.2%. Lenovo (OTCPK:LNVGY) claimed a 7.6% server share (#4) thanks to the IBM deal, kicking Oracle (NYSE:ORCL) out of the top-5 along the way.
- EMC, whose high-end storage sales have been pressured (mid-range/flash demand has been better), saw its storage share drop to 22.2% (still #1) from 23.1%. NetApp (NASDAQ:NTAP), which posted an FQ3 miss and light guidance last month amid tough mid-range competition from EMC and others, saw its share drop to 7.2% (#5) from 8%.
- Not surprisingly, the white-label hardware beloved by Google, Facebook, Amazon, etc. continued to take share. IDC estimates such hardware, referred to as ODM Direct, claimed server and storage shares of 8.2% and 12.8% vs. 6.4% and 9.9% a year ago.
- Sales of x86 servers, the lion's share of which run on Intel CPUs, rose 7.1% to $11.5B. Sales of non-x86 servers fell 14% to $3B, thanks to declining demand for both mainframes and UNIX servers running proprietary RISC CPUs. "Early-stage revenue" was seen for ARM (NASDAQ:ARMH) servers, largely via HP's Moonshot line.
- Other companies with strong server and/or storage exposure: STX, WDC, SMCI, MLNX, AVGO, QLGC, RHT
Mar. 2, 2015, 8:49 AM| Mar. 2, 2015, 8:49 AM | 5 Comments
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