HP sales down across the board as botched acquisitions take their toll

By Graeme Burton
20 Nov 2012 View Comments
HP's Meg Whitman

Full year

Further reading

For the full-year to the end of 2012, total revenues fell by almost $7bn (£4.4bn) to $120.4bn (£75.6bn), although thanks to staffing and other cuts, costs were also slashed by $3.3bn (£2.07bn) at the same time.

It is, though, a common tactic of incoming CEOs to throw as much "bad news" into their first year's financials as possible in order to make subsequent years look more positive, while also providing an opportunity to quietly reverse earlier write-downs to bump up financial performance in subsequent years. 

Despite the revenue falls, HP reported positive cash-flow generation – meaning that it is not in the same boat as Nokia and Research in Motion, which have both been haemorrhaging cash this year.

However, its net debts have grown by 70 per cent to $30bn (£18.85bn) in the past five years as it has pursued growth by misguided acquisition, especially of Autonomy, which rival Oracle passed on at almost half the price, and Palm, which imploded almost entirely following HP's purchase. 

Sold short

Jim Chanos, a stock market "short seller" – someone who bets on the value of a company declining by borrowing shares from an institution, which they sell and then buy-back to return the shares to the institution after a pre-agreed period, pocketing the difference as profit – had said that the company's poor record of acquisitions would ultimately bring it down.

Chanos said that as a result of those acquisitions, of which Autonomy was just one of many grossly over-valued purchases that it made, HP is stuck in "the ultimate value trap".

It has spent $39.9bn (£25.1bn) on acquisitions since 2007, which equals more than four-fifths of HP's free-cash-flow in that period. Acquisitions of Compaq, EDS, Palm and Autonomy have had major problems and write-downs associated with them.

With revenues declining in even once-core areas such as printing, more and more stiff questions are being asked about HP and its strategic direction – or lack of it. 

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