Aug. 21, 2014, 11:12 AM
- Though its FQ3 EPS was only in-line, the $2.6B in free cash flow H-P (NYSE:HPQ) produced beat BofA/Merrill's forecast of $2.1B, and its guidance for $9B in FY14 FCF was also better than expected.
- Moreover, BofA is hiking its FY15 and FY16 EPS estimates on expectations of rising services margins. BMO observes H-P expects services margin to grow in FY15 even though signings are set to drop 6%-8% in FY14.
- Morgan Stanley is focusing on H-P's improving top-line: It points out annual revenue growth was positive for the first time in 2.5 years, and views recent PC, x86 server, and networking strength as "sustainable medium-term."
- Goldman, which finally upgraded H-P to Neutral in June, says it's still cautious due to long-term concerns. "Non-PC revenue and gross margin expansion will become increasingly important as we transition into 2015."
- Shares have made fresh multi-year highs.
- Prior H-P earnings coverage
Aug. 20, 2014, 7:03 PM
- "The PC business is flat to declining slightly and we think that that will continue," says Meg Whitman on H-P's (NYSE:HPQ) FQ3 CC. However, Whitman argues her company, which just reported 12% Y/Y PC division sales growth, can "continue to gain share in a relatively flat market." (live blog)
- While upbeat about H-P's PC, server, and networking performance, Whitman admits printing supplies and software (two high-margin businesses) "still face challenges." Supplies revenue (-5% Y/Y in FQ3), hurt by a secular shift towards online/mobile document and picture-viewing, is expected to remain under pressure.
- CFO Cathie Lesjak states YTD free cash flow has totaled $7.4B; H-P expects to finish FY14 (ends in October) with ~$9B in FCF. Discussing macro conditions, Lesjak mentions Russian demand is expected to be hurt by geopolitical tensions, and Chinese demand by "increased competitive pressures."
- Whitman asserts H-P has seen an improvement in server win rates against IBM, as it takes advantage of "the uncertainty customers feel" about the sale of Big Blue's x86 server unit to Lenovo. H-P's x86 server sales grew 9% Y/Y in FQ3.
- HPQ -0.9% AH. FQ3 results, guidance/details.
Aug. 20, 2014, 4:25 PM
- H-P (NYSE:HPQ) is guiding for FQ4 EPS of $1.03-$1.07, in-line with a $1.05 consensus.
- PC sales rose 12% Y/Y in FQ3 to $8.6B, better than FQ2's 7% growth and fueling the revenue beat. Commercial PCs +14%, consumer +8%. Also helping: enterprise hardware division sales rose 2% to $6.9B, a turnaround from FQ2's 2% drop.
- Enterprise services remains weak, falling 6% to $5.6B after dropping 7% in FQ2. Software -5% to $959M, worse than FQ2's flat growth. Printers -4% to $5.6B, an even decline with FQ2. Financial services -3% to $855M, after dropping 2% in FQ2.
- A mix shift towards PCs appears to have pressured EPS. The PC division has only a 4% op. margin, lower than H-P's total non-GAAP op. margin of 8.5%.
- Printing hardware units and supplies revenue both fell 5%. x86 server revenue +9%, mission-critical servers -18% (Itanium weakness), storage -4%, networking +4%. Software license revenue (high-margin) fell a steep 16%.
- GAAP gross margin rose 70 bps Y/Y to 24%. SG&A spend +3% to $3.4B; R&D +11% to $887M. $582M was spent on buybacks.
- HPQ -1.1% AH. FQ3 results, PR.
Aug. 20, 2014, 4:06 PM
Aug. 19, 2014, 5:35 PM
Aug. 18, 2014, 9:38 AM
- Citing the company's ability to benefit from improving IT spending, Monness Crespi has upgraded H-P (HPQ +0.9%) to Buy ahead of the IT giant's Wednesday FQ3 report.
- Cisco reported strong July quarter enterprise/SMB order growth last week (carriers and emerging markets were a different story), and NetApp mentioned during its earnings CC it's seeing stronger enterprise demand. Both companies added the U.S. was an area of strength.
- IDC forecast 4.1% 2014 IT spending growth in May, with pent-up demand in developed markets offsetting emerging markets softness. H-P continues trading near a 52-week high of $36.21, and is up 28% YTD.
Aug. 13, 2014, 4:02 PM
- The Information reports Google (GOOG +2.1%) has talked with H-P (HPQ +0.5%) and others about bringing its Google Now voice search/virtual assistant platform to the enterprise. Google and H-P are also said to have talked about creating an enterprise-specific Nexus device.
- Now, beloved by many Android users for its ability to analyze user data and preferences to send time and location-sensitive notifications, would reportedly be used to allow employees to "ask their Android device for company information such as financial data or product inventory information in the same way they do routine personal searches."
- Google is said to view an enterprise version of Now (often favorably compared to Apple's Siri) as a way to narrow iOS' enterprise activation lead. Apple is just a month removed from announcing a huge partnership with IBM; The Information says Apple talked with H-P about a Siri deal before reaching an agreement with Big Blue.
- Eric Schmidt mentioned last year Now could be used in the future to handle enterprise analytics applications, and thus address a burgeoning market for analytics tools that can be used by non-IT workers. The Web giant has long offered enterprise search appliances that can handle a variety of file types.
- H-P's Autonomy (enterprise search/pattern recognition) and Vertica (analytics database) offerings could aid Google's effort.
Jul. 17, 2014, 4:12 PM| 4 Comments
Jul. 17, 2014, 7:53 AM
Jul. 16, 2014, 10:43 AM
- Intel (INTC +6.2%) has received 19 PT hikes following yesterday's Q2 beat, strong guidance, encouraging PC/server figures, and buyback announcement. UBS has upgraded shares to Buy, while predicting improving margins and a healthy balance sheet (to fuel buybacks) will drive upside.
- "A Tim Howard quarter; no holes," gushes Credit Suisse. Its PT is up to $40. Drexel Hamilton now has a Street high of $50. Stifel ($36 PT) notes Intel "continues to wring out costs" from its 22nm manufacturing processes, and includes the pending launch of Grantley (22nm Xeon E5) and 14nm Broadwell CPUs on its list of catalysts.
- Morgan Stanley ($30 PT) is more cautious: It argues non-PC/server initiatives "continue to be problematic," that buybacks stand to bring net cash to zero, and that mobile revenue could turn negative in Q3 due to contra revenue payments to tablet OEMs.
- Notable CC remarks (transcript): 1) The Data Center Group saw cloud, networking, HPC, and enterprise sales all grow over 15% in Q2. 2) Bay Trail Atom CPUs now make up nearly 20% of notebook mix (enabling lower price points, but pressuring ASPs). 3) Intel is seeing "clear signs" of an enterprise/SMB PC refresh, but thinks consumer demand "remains challenging," largely due to emerging markets.
- When pressed about its mobile ops, Brian Krzanich argued moving downmarket with platforms such as SoFIA is crucial to making the business profitable. CFO Stacy Smith admitted Intel needs to develop integrated baseband/app processors, and promised mobile losses would narrow (but not disappear) next year.
- H-P (HPQ +1.8%) has joined AMD (previous) in following Intel higher.
- Prior Intel coverage
Jul. 15, 2014, 8:20 AM| 4 Comments
Jul. 14, 2014, 2:30 PM
- H-P (HPQ +0.6%) will offer a quality $199 Windows laptop for the holidays, Microsoft (MSFT +0.3%) COO Kevin Turner promises at his company's partner conference. Turner also says H-P will sell 7" and 8" Windows tablets for $99, and that Toshiba will sell a $249 notebook with an 11.6" screen and 32GB SSD.
- "We’ve got a great value proposition against Chromebooks," claims Turner, driving home whom he considers competition. IDC noted last week Chromebooks, which added offline app support last year, contributed to a Q2 rebound in low-end notebook sales.
- Turner's remarks come as Digitimes reports Microsoft is planning to end Windows license fees for all sub-$250 tablets. The company has already eliminated fees for all sub-9" mobile devices.
- Turner also declares SharePoint to be a $2B/year business, says Office has "rescued" 785 Google Apps customers in the last 18 months, and reports Azure added 42K+ customers in FY14 (ended in June). (live blog)
- He claims (citing market share data) Microsoft's Hyper-v is "eating VMware's (VMW +1.8%) lunch" in the server virtualization market. Wells Fargo cited slowing server virtualization growth as a reason for downgrading VMware last week, while asserting "most industry analysts agree that Microsoft has essentially closed the functionality gap with [VMware's] vSphere."
- Microsoft and VMware both report on July 22.
Jul. 10, 2014, 12:51 PM
- Mark Interrante, until now Rackspace's (RAX -2.1%) SVP of products and engineering, has been hired by H-P (HPQ +0.4%) to be the SVP of engineering for the company's cloud services unit
- Both H-P and Rackspace offer cloud infrastructure (IaaS) services based on the OpenStack platform; Rackspace is an early leader within the market. H-P also offers cloud app platform (PaaS) services with the help of a partnership with Cloud Foundry (a part of EMC/VMware's Pivotal spinoff). Each company faces intense competition from Amazon, Google, and Microsoft.
- Meanwhile, re/code states multiple sources have "categorically denied" a TechCrunch report stating H-P made a $43/share bid for Rackspace. As it is, dealReporter had expressed skepticism about the reliability of a source providing similar info.
Jul. 9, 2014, 5:29 PM
- Global PC shipments fell only 1.7% Y/Y in Q2 to 74.4M, says IDC. That's much better than the firm's forecast for a 7.1% drop, and smaller than the 4.4% and 5.6% declines respectively seen in Q1 and Q4. Gartner is even more positive, estimating shipments rose 0.1%, thus ending a long string of declines.
- Unsurprisingly (especially given INTC's Q2 guidance hike), IDC thinks business PC upgrades stemming from Microsoft's (MSFT) ending of Win. XP support helped out. But it also says consumer demand was better than expected, with sales of low-end PCs (inc. Chromebooks) improving amid slowing tablet growth.
- Sales in the U.S. and EMEA (two high-ASP regions) rose, while Asia-Pac (exc. Japan) still fell by nearly double digits. IDC now thinks full-year industry growth "could get closer to flat, rather than the May projection of -6%."
- IDC's Q1 share data points to industry leaders gaining at the expense of smaller players: Lenovo (LNVGY) 19.6% share, +270 bps Y/Y. H-P (HPQ) 18.3%, +190 bps. Dell 14%, +180 bps. Acer (ACEIY) 8.2%, -10 bps. Asus (ASUTY) 6.2%, +30 bps. Everyone else 33.6%, -690 bps.
- HPQ +0.6% AH. Other names with strong PC exposure: AMD, NVDA, MU, STX, WDC, HTCH.
Jul. 2, 2014, 8:13 AM
- Rackspace (RAX) is in talks with a P-E firm about a deal to take the company private, reports TechCrunch, with an eye towards maybe making an official announcement this week.
- "The pressures of being a public company are too much," says one source, and the idea of going private "has gained sufficient traction" in the boardroom.
- The going-private leak comes amid at least three acquisition bids, says TC, including one from H-P (HPQ) for up to $43 per share.
- RAX +9.6% to $37 premarket
- Previously: Rackspace falls on negative M&A report
Jun. 27, 2014, 2:22 PM
- Reuters reports H-P (HPQ -0.3%) has agreed to settle 3 shareholder suits over the infamous Autonomy acquisition, and that the shareholders' attorneys will now assist the company in "pursuing claims" against ex-Autonomy CEO Mike Lynch and other execs.
- The payout is unknown, but it could be substantial: H-P recently paid $57M to settle a less high-profile class-action suit alleging ex-CEO Leo Apotheker and other execs defrauded investors by abandoning a business model they previously talked up.
- The IT giant took a colossal $8.8B write-down in 2012 on its $11.1B Autonomy purchase, after declaring it had uncovered evidence Lynch and his team were guilty of many accounting misdeeds. H-P and Lynch have since been involved in a bitter war of words.
- In spite of the write-down, H-P has remained committed to Autonomy, arguing its enterprise search/indexing software is pivotal to a big data software lineup that also includes the company's Vertica analytics database.
- Update: H-P says it's "in serious discussions" to settle the Autonomy suits, but adds "no final deal has been reached yet."
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Hewlett-Packard Company is a provider of products, technologies, software, solutions & services to individual consumers, small- and medium-sized businesses and large enterprises, including customers in the government, health and education sectors.
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