HP's R&D spending back to 2008 levels

HP's R&D spending back to 2008 levels

Summary: Three percent of revenue spent on research and development may not sound like a lot, but for HP it's an innovation step in the right direction.

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If Hewlett-Packard spends the same amount in the fourth quarter as it did in the third on research and development is should hit the 3 percent of revenue mark, a level not reached since 2008.

Simply put, HP CEO Meg Whitman is backing up her research and development talk with some actual dollars. Now HP's R&D spending isn't going to wow the world---and is half of what IBM spends annually as a percentage of revenue---but the company is taking a small step in the right direction.

HP satisfies Q3 earnings targets; CEO Whitman 'pleased' with progress

For the nine months ended July 31, HP spent $2.57 billion on research and development, or 3.1 percent of revenue. If HP spends $887 million on R&D in the fourth quarter to match the third and meets revenue current revenue estimates, the company should stick at the 3.1 percent of sales R&D ratio.

In nominal terms, HP's R&D spending for fiscal 2014 should be about $3.45 billion or so. R&D last spent that much on R&D in 2008 when revenue was $118 billion. HP is expected to report fiscal 2014 revenue of $111 billion.

To put into perspective they symbolic R&D win of spending 3 percent of revenue on innovation consider recent history via regulatory filings.

  • 2013: 2.8 percent of revenue spend on R&D
  • 2012: 2.8 percent
  • 2011: 2.6 percent
  • 2010: 2.3 percent
  • 2009: 2.5 percent
  • 2008: 3 percent
  • 2007: 3.5 percent
  • 2006: 3.9 percent

Whitman said she was committed to R&D and preferred it over mergers and acquisitions:

With regard to M&A, now that we have repaired the balance sheet -- as I have said before, I do think M&A will be a part of our strategy, but let me assure you this will be returns-based. It will be focused on only things that we cannot do organically. Given the choice, I would rather invest organically. This is the heritage of Hewlett-Packard. We do core R&D better than anyone else.

Add it up and I'm left to conclude that maybe the coast is clear to actually believe that HP is putting some money into R&D. Until now, the R&D talk wasn't backed up by actual spending.

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Topics: CXO, Hardware, Hewlett-Packard, Innovation

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2 comments
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  • Whitman excellent

    Big hopes are on in the command of Meg Whitman, HP advances in the correct address and the investments in R&D they are significant, the following bet is M&A but like she affirms only it will be invested in things that HP cannot do organically.
    luis river
  • When you look at the actual dollars booked

    HP is a major player in cloud by revenue. The value that HP can bring to the table in respect to Hardware (servers), Deep Packet Inspection (they do that also), and finally to supporting the life-cycle transition to the cloud, providing both legacy support and augmenting that with dedicated resources to transition make HP more than just a printer company. Additionally HP is spending that money on human capital, that might be training on security and ATO accreditation for cloud services, setting up a new portal designed to showcase the integration of vendors and products for the cloud, or 50 million into Hortonworks. HP I think corrected in respect to both focus and now also the beneficiary of a renewed PC upgrade cycle where they do cater to a higher-end workstation and laptop that appeals to the business vertical market.

    But in summation: HP can not only provide the services in HR to complete a contract for the cloud but also has the ability to progress the hardware to do so with DPI (security) and their servers.

    Intrusion Prevention Systems (IPS)
    Threat Management Systems (TMS)
    Security Management System
    Networking Security Appliances
    Moonshot
    HP helion

    Most importantly a top down emphasis on transformation and and ability of a sole vendor to incorporate the technology into on-site or off-site solutions.
    cdaringer@...