HP's Hurd: IT downturn different than 2001; Ink matters

Hewlett-Packard's fiscal fourth quarter didn't offer up many surprises given the company preannounced the results along with its outlook. But there were more than a few notable nuggets that indicate where tech demand is heading.

Here's a look at the top five takeaways from HP's earnings report (Techmeme, SeekingAlpha transcript):

1. This downturn is different than what the technology industry faced in 2001. HP CEO Mark Hurd noted some key differences between this economic downturn and the dot-com bust. Analysts were watching HP's commentary closely since the company can tell you how business is with November mostly in the bag.

Hurd said on the company's conference call that the economy is far from normal, but customers are thinking hard about where they spend their money. November sounds stable, but it's not a lot better than October. Hurd's money quote:

"We have a different environment, than we had, say, back in 2001. We don't have the infrastructure build out that we had at that timeframe, and I think people are more cognizant that at a TCO (total cost of ownership) level, keeping stuff too long is not a great thing either from a total cost perspective."

2. Credit is thawing. Hurd noted that mid-market customers are able to get funding for IT projects. That wasn't the case in October. That said, Hurd cautioned analysts not to get carried away. However, the midmarket is critical to the technology industry so any positive news is welcome.

3. Ink matters--a lot. What was really telling about HP's conference call was the amount of time spent on printer supplies. Why? Ink is recurring revenue. Ink sales--along with services contracts that provide ongoing revenue--act as a buffer in a downturn. HP gets a third of its revenue from recurring revenue sources. HP did raise its ink prices in October to fuel 9 percent growth in its supplies business.

4. The benefits of EDS will become clear in the downturn. HP said that its integration of EDS is on track and more importantly services are countercyclical to a slowing economy. Hurd said:

"I think in this environment services in many cases is countercyclical, so what you have is people trying to take cost that could be capital and outsourcing that to somebody else so that they actually take the cost for them and in some cases variablize the cost where it makes sense, so that becomes an attractive value proposition for our customers."

5. Notebook sales are strong. Notebook revenue was up 21 percent, an impressive performance given the environment.