HP’s upswing: a second wind, or just an XP-based blip?

By Peter Gothard
22 Aug 2014 View Comments

HP's surprising $27.6bn third quarter revenue - a full one per cent up on last July's figures - has caused CEO Meg Whitman to loudly and proudly state that her plan to turn around HP in the PC space is coming good.

"When I look at the way the business is performing, the pipeline of innovation and the daily feedback that I receive from our customers and partners, my confidence in the turnaround grows stronger," she said.

Further reading

At first glance she might be right. PCs and laptops were up 12 per cent in revenue terms, with commercial PC sales up 14 per cent, and even consumer sales rose by eight per cent.

However, it's worth noting that, despite Whitman's boasts, HP's actual operating margins have reduced, despite reported profits of $985m. It doesn't seem to be fooling the stock market either: HP's shares ended yesterday down one per cent.

What kind of actual business strategy could possibly encourage people to magically begin buying more PCs and laptops in a struggling, downturning market?

Whitman would say it's HP's products, pricing and marketing power. However, Roy Illsley, principal analyst at Ovum, says it's a blip, owing to a certain gigantic software company removing support for a certain 13-year-old OS around the time HP's quarter was recorded.

"PC sales were expected to see a slight rise as the end of XP support caused many to consider replacing older machines, as upgrading was not an option, as PCs did not meet the requirements of Windows 7," Illsley told Computing.

"I do not see this as any more than a blip. The PC is still the workhorse for many companies and consumers, but this is changing as tablets and laptops become as powerful."

Illsley expects PC sales at HP to return to the "downward trend" by next year, but that the end of life for Windows Server 2003 may create a new demand for server machines in 2015/2016 - possibly putting another smile on Whitman's face.

"But this will face competition from cloud services as an alternative to replacing internal systems," he warned.

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