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

Printer sales down by one-fifth, while PC sales fall 12 per cent

HP has reported almost across-the-board declines in revenue in its fourth-quarter and full-year results, which were capped by claims of accounting irregularities at Autonomy, the intelligent-search software vendor it acquired for $11.1bn (£7bn) in August 2011.

HP filed some $8.8bn (£5.5bn) in write-downs, of which around $5bn (£3.15bn) were attributed to a write-down in the value of its Autonomy acquisition - which has underperformed financially all year.

However, that bombshell distracted attention away from a broader emerging disaster at HP, with sales of PCs, servers, printers and services all falling, both in the fourth quarter and in its results for the last fiscal year.

The company achieved total sales of $120.4bn (£75.6bn) in the fiscal year to the end of October 2012, down by five per cent on the company's performance in 2011. Its fiscal 2012 net loss weighed in at $12.65bn (£7.95bn) after "goodwill impairments" of $18bn (£11.3bn).

In the fourth quarter, revenues declined by seven per cent to $30bn (£18.85bn).

In the fourth quarter, the Personal Systems group - which covers PCs, laptops, netbooks and other devices - posted a 14 per cent drop, with commercial revenues down by 13 per cent, and consumer by 16 per cent. Total unit sales fell by 12 per cent across the board.

Printer revenues fell by five per cent, with unit sales plunging by one-fifth. Commercial hardware unit sales fell by 15 per cent and consumer printer sales dropped by 20 per cent.

All areas of HP's services business also posted revenue drops, averaging six per cent, while Enterprise Servers, Storage and Networking revenue declined by nine per cent - with only networking revenues increasing by seven per cent in the quarter.

Software revenue was up, though, by 14 per cent, year-on-year, with overall licence growth up nine per cent, support up by the same amount, and software services up by 48 per cent.

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

Printer sales down by one-fifth, while PC sales fall 12 per cent

Full year

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.