Last quarter HP wrote-down $8bn against its ailing Services business (see HP – the picture says it all). This time in Q4, it was Software’s turn, with an $8.8bn write-off against Autonomy. There is a lot to say on this issue alone (see HP, Autonomy and Serious Fraud Office).
The write-off heaped yet more misery on HP’s investors, sending its shares down another c10% - they are down almost 60% year to date. The numbers themselves certainly make grim reading. Q4 revenue was down 7% to $30bn, and down 5% in the full year to $120.4bn. HP made a Q4 GAAP operating loss of $6.5bn vs. a $795m profit last time. Meanwhile, in the full year, operating losses reached $11.1bn vs. a $9.7bn profit last time. Geographically, EMEA was the worst performer in Q4, with revenue down 8%.
Looking at the operating divisions, only software is holding up, thanks largely to recent M&A activity. Q4 revenues were down across Personal Systems (-14%), Printing (-5%), Enterprise Servers, Storage and Networking (-9%) and Services (-6), and all seeing sharper quarter on quarter declines. Software was up 14% (vs. 18% last quarter), although the vast majority of this is down to the Autonomy and Vertica acquisitions. We think there might even be a minus sign lurking under the covers.
Services revenue fell across the board, in technology services (-4%), application and business services (-7%), and IT outsourcing (-6%). As we heard last month, the outlook for next year is pretty sombre (see Meg paints a bleak picture of HP in 2013) with services now expected to decline by 11-13% in 2013 and margins to all but disappear (0-3%). Services margins were at 14.2% in Q4, so they have a long way to fall in 2013.
CE Meg Whitman tried to put a positive spin on things in the conference call, pointing out that the Strategic Enterprise Services business is seeing positive bookings and revenue growth. This division covers services around cloud, application modernisation, security, information management and analytics. But it won’t be enough to counteract the ‘headwinds from revenue run off’ elsewhere.
Yet again Whitman pointed to 2012 being the first year of a multi-year turnaround. She said 2013 will be a ‘fix and rebuild year’ which will see ‘a critical change to the organisational structure’ of the company. We will have plenty more to comment on this as work gets underway. One thing for certain is that 2013 is going to be another tough year for HP.