May. 30, 2014, 6:41 PM
- IDC estimates global server sales fell 2.2% Y/Y in Q1, a slightly smaller decline than the 4.4% drop seen in Q4. Gartner, however, puts the decline at 4.1%.
- The embrace of white-label hardware by Web giants continues taking a heavy toll: IDC thinks white-label sales, which it calls ODM Direct, grew 75% Y/Y (up from Q4's 47% clip) and made up 7.3% of industry revenue, up from 6.4% in Q4 and 4.1% a year ago.
- IDC estimates market leader H-P (HPQ) saw its share hold steady at 26.5%, after having grown (at IBM's expense) 260 bps Y/Y in Q4. #2 IBM, whose hardware sales have been battered, saw its share fall 600 bps Y/Y to 19.1%.
- #3 Dell's share slipped 20 bps to 18%, while #4 Cisco (CSCO), which just reported a 29% Y/Y April quarter sales jump for its UCS server segment, saw its share rise 170 bps to 5.7%. #5 Oracle (ORCL), whose server sales are finally stabilizing thanks to engineered systems growth, rose 20 bps to 4.9%.
- Sales of x86 servers, over 90% of which contain Intel (INTC) CPUs, rose 4.9% after growing 7.8% in Q4. Non-x86 server sales tumbled 25.2%, and now make up just 17.9% of industry revenue.
- Cisco now has an estimated 24.4% of the blade server market, behind only H-P's 43.7%.
May. 23, 2014, 10:47 AM
- Credit Suisse and UBS have respectively hiked their H-P (HPQ +6%) PTs to $35 and $34 after the company posted an FQ2 revenue miss to go with in-line EPS, and announced fresh job cuts. Both cite positive earnings/cash flow trends.
- CFO Cathie Lesjak mentioned on the CC (transcript) H-P had FQ2 free cash flow of $2.3B, soundly above net income of $1.7B. She added the company's cash conversion cycle fell by 3 days Q/Q to 13.
- Lesjak offered more cautious remarks on PCs/printing: Toner sales are expected to "remain under pressure" for the rest of the year, and "higher component costs" (at least a partial reference to DRAM prices) are expected to pressure PC margins.
- Enterprise hardware margins are still being dinged by a "competitive pricing environment," but Lesjak promises restructuring moves will yield better 2H profitability. From a top-line standpoint, the business has benefited from IBM's struggles, but is also hurt by rising demand for white-label hardware.
- The new job cuts are expected to produce a $500M charge. Their impact on FY15 profitability won't be shared until the October analyst meeting.
May. 22, 2014, 4:17 PM
- After releasing its core results early, H-P (HPQ) has provided its full FQ2 report after the close. The IT giant guides for FQ3 EPS of $0.86-$0.90 vs. an $0.89 consensus, and FY14 EPS of $3.63-$3.75 vs. a $3.71 consensus.
- H-P also announces it's increasing the size of its job cuts by 11K-16K positions. The company, which had ~317K employees last year, has already announced plans to shed 34K jobs.
- $831M was spent on buybacks in FQ2, helping EPS meet estimates in spite of a revenue miss. Gross margin rose 50 bps Y/Y to 24.2%. R&D spend +7% Y/Y to $873M, SG&A spend +1% to $3.39B.
- Contributing to the revenue miss: Printing revenue fell 4% Y/Y after falling 2% in FQ1, enterprise hardware fell 2% after growing 1%, and enterprise services once more fell 7%.
- PCs were healthier (+7% vs. +4%, with 12% commercial growth offsetting a 2% consumer drop). As was software (flat vs. -4%, with 8% license growth). Financial services -2% vs. -9%.
- High-margin printing supplies revenue fell 7%, while printing hardware units rose 1%. In enterprise hardware, a 6% drop in storage and a 14% drop in business critical systems (Itanium weakness) offset a 6% increase in networking. x86 servers rose 1%.
- HPQ -1.2% AH after falling 2.3% in regular trading. FQ2 results, PR
May. 22, 2014, 3:37 PM
May. 21, 2014, 5:35 PM
May. 15, 2014, 9:02 AM
May. 2, 2014, 1:34 PM
- Joel Greenblatt's screen looks to find stocks with high "earnings yield" - a high ratio of profits to enterprise value. Companies are further screened for a strong return on capital. When a stock scores well with both criteria, it's usually a good company being undervalued by investors.
- For picking individual stocks, there are probably better methods, but as a group, Magic Formula names have vastly outperformed the broad market.
- Although defense names have done well over the past couple of years, the Magic Formula continues to identify Northrop Grumman (NOC +0.2%), General Dynamics (GD +1.4%), and Raytheon (RTN +0.6%) as attractive. Firearm names Smith & Wesson (SWHC +0.8%) and Sturm Ruger (RGR +0.3%) also make the cut.
- A number of videogame makers show up as well: Take-Two (TTWO +0.3%), Activision Blizzard (ATVI +0.2%), GameStop (GME +2.8%), and the struggling recent IPO King Digital (KING -0.3%).
- Not too surprisingly, the Magic Formula also continues to like plenty of big-cap tech names: Cisco (CSCO -0.2%), CA, Inc. (CA -0.5%), Microsoft (MSFT -0.5%), Hewlett-Packard (HPQ -0.5%), and Apple (AAPL +0.1%).
- Hardly market laggards, media names like Time Warner (TWX -0.8%), Viacom (VIA +1.4%), Omnicom Group (OMC), and Starz (STRZA +2.3%) also show up on the list, as do struggling multi-level marketers and for-profit education stocks: HLF, NUS, APOL, ESI, CPLA.
- Punished by investors for not being as hot as they once were, Coach (COH +0.2%), Francesca' Holdings (FRAN +0.1%), and Gap (GPS -1.3%) are Magic Formula picks today.
Apr. 29, 2014, 10:04 AM
- Pac Crest has upgraded H-P (HPQ +2.1%) to Outperform, while predicting profits will recover as the company's turnaround efforts continue.
- H-P is currently expected by the Street to post FY14 (ends in October) EPS of $3.71, and FY15 EPS of $3.84. Those figures are above FY13's $3.56, but below FY12's $4.05 and FY11's $4.88.
- FQ2 results arrive on May 22.
Apr. 22, 2014, 12:39 PM
- Though Lexmark (LXK -11.3%) beat Q1 estimates, it's guiding for Q2 EPS of $0.85-$0.95; the midpoint is below a $0.94 consensus. Revenue is expected to fall 2%-4% Y/Y vs. a -3.8% consensus. With shares having closed yesterday near their 52-week high of $47.98, the outlook isn't going over well.
- Supplies revenue (69% of total revenue), pressured by declining sales related to discontinued inkjet hardware, fell 1% Y/Y after growing 1% in Q4; laser supplies rose 9%.
- Hardware revenue (19% of total) fell 8% after growing 3% in Q4. Software/other sales (12% of total) grew 13%, down from Q4's 31%, with Perceptive Software's sales rising 38% to $64M.
- Gross margin rose 100 bps Y/Y to 41%. Opex rose 2% to $270M, and $21M was spent on buybacks.
- Rival H-P (HPQ -0.6%) is ticking lower on an up day for equities. H-P's printing ops accounted for 20% of its Jan. quarter revenue, and 36% of its op. profit.
Apr. 17, 2014, 12:01 PM
- IBM soundly missed revenue estimates for yet another quarter, thanks in large part to a 23% Y/Y drop in hardware/chip sales, and also reported a $3B Y/Y drop for its services backlog. SAP missed Q1 estimates due to a mixture of forex pressure and light software license revenue.
- Microsoft (MSFT -1.4%), whose enterprise software ops compete against both IBM (middleware, databases, developer tools) and SAP (ERP/CRM apps, databases), is trading lower. As is IBM archrival H-P (HPQ -2.6%).
- A few enterprise cloud software vendors, some of whom compete against SAP, are also off: JIVE -3.5%. N -2%. VEEV -1.9%. MKTO -2.2%.
Apr. 14, 2014, 7:07 PM
- An April Barclays survey of 100 U.S. and European CIOs found 46% expecting their company's IT spending to rise in 1H14, 20% expecting it to drop, and 34% expecting no change. Those figures compare with September survey levels of 43%, 27%, and 30%.
- Moreover, IT spending growth is seen accelerating in 2H in both the U.S. and Europe. Barclays thinks larger budgets, macro stabilization, and a need for equipment refreshes (due to high utilization rates) could be helping out.
- At the same time, the firm cautions the spending growth is uneven: Software, networking, security, and cloud services demand is healthy, but servers, storage, and IT services remain soft. Interest in the concept of a software-defined data center is gaining traction, but big data (hyped considerably last year) is losing it for now.
- Gartner has forecast IT spending will rise 3.2% this year to $3.77T after growing just 0.4% in 2013. Enterprise software (+6.9% to $320B) is expected to lead the way.
- Barclays thinks its survey bodes well for H-P (HPQ), Juniper (JNPR), F5 (FFIV), Aruba (ARUN), Ingram Micro (IM), and CDW, each of which is rated Overweight.
- Others that might take heart in the survey results: CSCO, ORCL, SAP, CA, SWI, VMW, CHKP, BRCD, ARW, AVT
Apr. 10, 2014, 10:16 AM
- Morgan Stanley has hiked its FY15/16 H-P (HPQ +2.8%) EPS estimates above consensus on expectations of a margin recovery for the company's slumping enterprise services unit.
- The firm thinks enterprise services will post at least an 8% FY16 (ends Oct. '16) op. margin, up from just 1% in FQ1. It points out rival Computer Sciences (CSC -0.5%), which has carried out similar restructuring moves and has a slightly less favorable revenue mix, is set to have a 9% 2014 op. margin.
- Deutsche, meanwhile, has assigned H-P a Buy rating and $40 PT as part of a broader IT hardware coverage launch. The firm likes H-P's IT hardware lineup, and sees "ample room" for margin expansion as "the company gets closer to industry levels in segments like software, services, storage and networking."
- Deutsche thinks software op. margin could rise to 30% from a current 22%, and forecasts company-wide op. margin will rise to 9.4% in FY15 from 8.5% in FY13.
Apr. 9, 2014, 4:52 PM
- IDC estimates global PC shipments fell 4.4% Y/Y (less than a 5.3% forecast) in Q1 to 73.4M, after having declined 5.6% in Q4 and 7.6% in Q3. Gartner thinks shipments only fell 1.7%, and totaled 76.6M.
- IDC chalks up the narrower decline to healthy commercial demand, as buyers purchased Windows 7 systems ahead of Microsoft's (MSFT) termination of Windows XP support. The firm also thinks slowing tablet growth helped out.
- IDC thinks Japanese shipments rose 7%, and U.S. shipments only fell 0.6% thanks to 3.5% desktop growth. Emerging Asia-Pac and Latin American markets, where tablet cannibalization is at an earlier stage, remained weak..
- A mix shift towards developed markets benefits both Microsoft (higher ASPs, less piracy) and Intel (INTC - higher ASPs).
- IDC estimates market leader Lenovo (LNVGY) had a 17.7% share, +220 bps Y/Y. #2 H-P's (HPQ) share rose 150 bps to 17.1%, and #3 Dell's 170 bps to 13.4%. #4 Acer's (ASIYF) share fell 130 bps to 6.8%, and #5 Asus' 20 bps to 5.9%.
- The Q1 numbers suggest IDC's prior full-year forecast for a 6% shipment drop might prove too pessimistic.
- Other companies with strong PC exposure: AMD, NVDA, MU, STX, WDC, HTCH
Apr. 9, 2014, 1:11 PM
- H-P (HPQ +0.6%) is paying $108M to settle long-running DOJ and SEC probes related to potential violations of the Foreign Corrupt Practices Act. The IT giant will also "undertake certain compliance, reporting and cooperation obligations."
- Poland's interior minister mentioned overnight H-P is ready to admit to engaging in "corrupt activities" in his country. In addition to Poland, the DOJ/SEC have been probing H-P's activities in Russia, Mexico, and other countries.
- German authorities have carried out a separate investigation over a Russian transaction that has led two former H-P employees to be indicted.
Apr. 9, 2014, 3:55 AM
- Hewlett-Packard (HPQ) is set to acknowledge today that it has engaged in "corrupt activities in Poland," the country's interior minister, Bartlomiej Sienkiewicz, has said.
- Poland's Central Anti-Corruption Bureau has cooperated with the FBI and SEC on the issue, Sienkiewicz said, although he didn't mention whether H-P would be prosecuted.
Apr. 1, 2014, 9:53 AM
- H-P (HPQ +1.4%) is settling a class-action suit accusing ex-CEO Leo Apotheker and his management team of defrauding investors by abandoning the business model they had previously touted.
- In a matter of months, Apotheker announced plans to abandon WebOS, spin off H-P's PC ops (later aborted), and (most infamously) pay $11.1B for Autonomy, which became the subject of an $8.8B write-down and massive fraud allegations.
- Bloomberg reported in February H-P is in talks to settle Autonomy-related shareholder suits.
HPQ vs. ETF Alternatives
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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