HP’s revenues fall by a tenth after Compaq buy

28 August 2002 Systems giant Hewlett-Packard has reported revenues down by a tenth in its first financial quarter since the completion of the Compaq acquisition in May. Ominously, sales fell in several of the company’s core divisions, including both its enterprise systems and services businesses.

For the third quarter to the end of July, HP’s revenues dropped by 11% to $16.5 billion (€16.8bn), compared to a combined $18.6 billion (€19bn) in the same quarter a year ago.

Shortly after completing its acquisition of Compaq, HP had forecast that it would deliver revenues of between $35 billion (€35.7bn) and $36 billion (€36.7bn) for the six months to the end of October 2002. Based on its latest figures HP might struggle to meet this target.

HP also reported a net loss of $2 billion (€2bn), which was almost exclusively related to restructuring costs and merger-related charges. The company said it had already reduced its workforce by 4,740 and that more than 5,000 further jobs would be cut before the end of 2002.

Sales were particularly disappointing in its enterprise systems business, which includes servers and software. Revenues at the enterprise systems group slumped 22% to $3.8 billion (€3.9bn), compared to $4.8 billion (€4.9bn) in the same period in 2001.

According to analysts Gartner Dataquest, HP is losing out in a still-declining server market. HP’s sales fell by more than major rivals IBM, Dell and Sun Microsystems, in the second quarter of calendar 2002, according to Gartner Dataquest’s figures.

As a result, they increased their share of the server market at HP’s expense. IBM still leads the market with a share of 29.6% (up 1.6%), compared to HP’s 24.7% (down a combined 2.7%), Sun’s 18.4% (up 1.8%) and Dell’s 7.2% (up 0.7%).

But HP CEO Carly Fiorina will be most concerned by the fall in revenues at HP’s services business. Third quarter services sales fell by 7% to $3 billion (€3.1bn), compared to $3.2 billion (€3.3bn) achieved in the third quarter of 2001.

Prior to the merger, Fiorina has said that the Compaq buy would help HP become a services giant in the mould of IBM. In addition, HP’s personal systems group – which makes and sells PCs – also saw revenues fall to $4.8 billion.

The one bright spot for HP was provided by its printer and imaging group where sales jumped by a tenth to $4.7 billion (€4.8bn).

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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