Hewlett-Packard Company (HPQ)

"BOSTON (Reuters) - A top research firm cut its forecasts for 2009 personal computer sales, expecting shipment value to drop 5.3 percent as the weak economy discourages some buyers and tight credit thwarts others."

http://www.forbes.com/reuters/feeds/reuters/2008/12/03/2008-12-03T152808Z_01_N03340276_RTRIDST_0_PC-SALES-UPDATE-1.html

Despite being the leader in the IT industry in terms of revenue, HP trails both Dell and IBM in terms of operating margin which in the long run will allow either Dell and/or IBM to surpass HP.

HP's investment in revamping its own IT infrastructure as a way to showcase its products and services will fail to draw new customers to HP's ESS segment.

Hewlett-Packard Co. (HPQ) lowered its forecast for 2009 profit yesterday (Thursday), as revenue in the fiscal first quarter was only $28.8 billion, about $3 billion shy of analysts’ expectations. The computermaker showed it isn’t immune to the pullback in consumer and corporate spending as sales of personal computers rose at the slowest pace in six years over the holidays, according to research firms Gartner and IDC. Sales of personal computers, which make up about one-third of HP’s total sales, fell 19% to $8.87 billion, and sales in HP’s revenue and imaging business fell 19% to $6 billion. HP expects revenue of $27.4 billion to $27.7 billion in the current quarter, which would be a 2% to 3% decline from revenue in the second quarter of 2008, MSNBC reported

IBM will take advantage of its high gross profit rate to make up the slight edge HP held in revenue in 2006 and retake its position as the number one provider of IT products and services.

HP Software Group is a substantial mishmash that lacks even the semblance of a strategy from other hardware manufacturers like IBM and EMC. Because HP has acquired and combined so many different pieces of software it’s not surprising that family may lack a coherence (think HP, Digital, Compaq, Tandem.) Between 30% and 50% of all existing HP software revenue has been acquired in the last 3 to 5 years. On of the latest, Mercury Interactive, was itself already the product of a few acquisitions.

At over $100B in annual revenues the $2.3B of software reported by HP is unlikely to get much attention from top management. As it stands the HP software product family is loosely concentrated around IT lifecycle management (ITLM) with products like OpenView and the Mercury offerings at the core. ^[1]