HP: Apotheker to set tone, strategy hints

HP: Apotheker to set tone, strategy hints

Summary: Hewlett-Packard is widely expected to deliver better than expected fiscal first quarter earnings, but the conference call will be closely watched for tone, hints about software strategy and other nuggets from new CEO Leo Apotheker.

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Hewlett-Packard is widely expected to deliver better than expected fiscal first quarter earnings, but the conference call will be closely watched for tone, hints about software strategy and other nuggets from new CEO Leo Apotheker.

Last quarter, Apotheker was only on the job a few days. This quarter, analysts will be looking for more insight and tips about strategy. However, analysts may come away a bit disappointed. HP is holding its strategy day March 14 in San Francisco. It's likely that HP will at least hold some of its fire until that date.

As far as the financials go, HP's quarter is expected to look a lot like Dell's. There will be gains in servers, storage and networking. And any slowdown in consumer PC sales will help profit margins nicely. Wall Street is expecting earnings of $1.29 a share on revenue $32.95 billion for the first quarter.

The positive factors for HP's quarter include:

  • Lower component costs.
  • A strong corporate upgrade cycle.
  • Momentum in networking.

Wedbush analyst Kaushik Roy said in a research note:

The corporate refresh cycle is still going strong and we expect HP to benefit from strength in the enterprise as well as commercial refresh cycles. IBM, EMC and VmWare have all reported good December quarter results. Server sales have been strong as indicated by Intel and Dell, and HP being the leader in server sales, it stands to benefit from the strength in the overall server market. The Win7 upgrade cycle is ongoing and thus the commercial PC segment is doing well as verified by hard drive makers Seagate and Western Digital, and PC maker Dell. Cisco and Dell indicated weakness in the public sector, but HP’s exposure to the public sector is less than Dell’s.

Next on the agenda will be Apotheker's strategy. Here the first quarter conference call is likely to be a warm-up act. However, HP's recent acquisition of data warehousing company Vertica sheds some light on where the company is heading.

Wells Fargo analyst Jason Maynard said Vertica may indicate bigger plans for HP's software business.

Maynard noted:

HP announced its intention to acquire Vertica Systems for an undisclosed sum. The acquisition moves HP back into the business intelligence and data warehousing market, albeit, in a small way. HP’s move is both intriguing and somewhat confusing because it indicates a change in their business intelligence strategy.

The upshot:

  • Vertica gives HP more ammo against Oracle.
  • The purchase could confuse HP's relationship with SAP.
  • Vertica may just preview a bigger deal in the future (Teradata, Tibco or Infomatica).

Topics: CXO, Dell, Enterprise Software, Hewlett-Packard

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