HP recovery bears fruit as incomes rise; Windows XP migrations drive device sales

HP has posted some of its most promising financials for several years, suggesting its long-term turnaround efforts are paying off. For the first quarter of 2014 the firm posted an increase in net income of 16 per cent, rising from $1.2bn to $1.4bn. Revenues were down one per cent year on year at $28.2bn, better than analyst predictions, and the firm said this was effectively flat with currency fluctuations taken into account. 

HP CEO Meg Whitman was upbeat about the results, claiming they showed the firm was in a “stronger position today than we've been in quite some time. The progress we're making is reflected in growth across several parts of our portfolio, the growing strength of our balance sheet, and the strong support we're receiving from customers and channel partners,” she said.
“Two years of turnaround work is setting us up for an exciting future.

One area of notable growth was in the firm's Personal Systems group that covers laptops and desktop machines, with revenue up 4 per cent, the first growth in seven quarters. Whitman attributed this to several trends, including more firms moving from Windows XP. There was a bit of a tailwind on the migration from XP to Windows, but I wouldn't say that was an overwhelming factor,” she said.

“I do think there's also some net momentum in the long overdue PC refresh, and what I think commercial customers are understanding from their employees is that they may want a tablet.”
Whitman also said she hoped that HP could capitalise on market uncertainty around IBM and Lenovo’s server deal, although she acknowledged the Chinese vendor would become a major competitor.

“What I have learned about this business is instability and questions about the future make it very difficult. People want to bet on a roadmap and they are worried about that as a change of ownership occurs,“ she said. So I think we had a near-term opportunity here to gain share in our enterprise services or in our server business.

"In the long term, Lenovo is going to be a powerful competitor and we aim to be well set up by the time the deal is done to compete aggressively. She also said that another 3,700 employees left the company in the quarter as part of the firm’s job cut plans, and confirmed a total of 28,300 would go.

Whitman added the results and the future growth potential in other areas had helped put HP back on a stable footing, and customers were reassured by this. We look like the paragon of stability right now, which is very different from two years ago. They [customers] have a lot of confidence in where we are headed from a product roadmap perspective,” she said.

The improved performance will be welcome news for Whitman and co at the top of HP after years of tough financial performances and ongoing legal headaches caused by its acquisition of Autonomy.