Hewlett-Packard is slimming down to flex its muscle in big data, cloud computing, and security. HP provides one of the tech world's most comprehensive portfolios of hardware, software, and services. It is the world’s largest provider of PCs; other products include servers, storage devices, printers, and networking equipment. The company’s services unit offers IT and business process outsourcing, application development, consulting, systems integration, and other technology services. HP generates software sales through enterprise IT management, data management, business intelligence, and carrier communications applications. The 75-year-old company, which serves customers worldwide, is undergoing a major restructuring as part of its turnaround strategy.
HP’s largest segments are its personal systems (PCs) and services groups, which each account for about 30% of sales. The printing segment contributes about 20% and enterprise servers, storage, and networking equipment brings in another 15%. Software and financial services (leasing, financing) round out the company’s offerings.
HP plans to combine its PC and printer business groups into its new HP Printing and Personal Systems Group as both units have struggled with changes in the marketplace. PCs are facing stiff competition from smartphones and tablets, while sales of printers and inks, once a primary source of revenue for the company, are falling as more businesses and consumers share documents and photos online.
The company generates about 35% of its in the US with the rest coming from such markets as Ireland, Israel, UK, Spain, Singapore, China, India, and Japan.
Sales and Marketing
HP markets its products directly, as well as through a wide range of third-party channels, including retailers, resellers and distributors, original equipment manufacturers, independent software vendors, and systems integrators.
After a disappointing 2011 in which sales increased a mere 1% and profit was at its lowest point in five years, HP reported a 5% decline in revenue in fiscal 2012 (ended October) to $120 billion and a net loss of nearly $13 billion. Two of the company’s largest units, personal systems and printing, continued to be impacted by weak consumer demand; those segments declined 10% and 6%, respectively. Services, which has been a focus of HP, declined by nearly 3% as current contract rates fell and the company was more selective in deals to fit its strategic direction. Only the relatively small software segment showed substantial growth (about 20%), due primarily to the acquisition of Autonomy. The substantial drop in net income is the result of write-downs in the value of Autonomy (because of “accounting improprieties” according to HP) and 2008 acquisition Electronic Data Systems.
In 2012 HP announced a sweeping reorganization intended to thwart faltering profits and a declining share price by streamlining operations and focusing more on sales to businesses than consumers. The company is looking for a simplified organizational structure to boost innovation and save money. It also expects headcount reductions as part of the initiative will number nearly 30,000 (about 8% of its workforce) by the end of fiscal 2014. HP plans to reinvest its savings around three areas of strategic focus: cloud computing, big data and analytics, and security.
HP has announced some plans for each segment. For its services segment, the company wants to add to its cloud computing, security, and information analytics capabilities, as well as shift its portfolio to include more profitable and higher growth services. In its software unit, HP plans to increase development of onsite and cloud-based security, big data, and application lifecycle and infrastructure applications. In its enterprise servers, storage, and networking business, the company plans to increase its development of each product line to create a converged infrastructure that will be the foundation for other initiatives including cloud, virtualization, big data analytics, social media, and modernization of legacy products.
In response to weak sales, HP shut down its short-lived tablet and smartphone business, which was centered on a wireless operating system known as webOS and a line of mobile phones acquired in the 2010 purchase of smartphone pioneer Palm. In late 2012, HP returned to the tablet market with the HP ElitePad 900. Meg Whitman, the former eBay CEO who took the helm of HP in late 2011, has indicated a return to smartphones may also be in the cards.
Mergers and Acquisitions
Although 2012 was a quiet year for acquisitions for the company, HP has made significant purchases in the past couple of years. In 2011, in the largest of its four acquisitions, it paid $10.2 billion to acquire UK-based data repurposing software maker Autonomy to bolster its enterprise software aspirations, specifically in content and information management and business intelligence. Autonomy also brought solid financials to HP, with double-digit revenue growth and good operating margins.
Among the company’s nearly dozen 2010 purchases were storage hardware and software provider 3PAR and networking hardware and software firm 3Com. HP hoped 3PAR, which was picked up for around $2.3 billion after a bidding war with rival Dell, would give it a boost in the booming market for corporate data storage systems. 3Com, which was bought for just more than $3 billion in cash, made a nice addition to HP's ProCurve networking line and added to its data center offerings. The acquisition has helped HP keep up with networking equipment vendors Brocade Communications and Juniper Networks and put the company in greater competition with networking giant Cisco Systems, which took aim at one of HP's strongest segments when it introduced blade servers for the data center as part of its Unified Computing System product line.