Sunday, 3 October 2010

Can HP and Leo give Larry a hard time?

After the news of Leo Apotheker joining HP, ample comments arose: Dennis Howlett's,Vinnie Mirchandani's, Ray Wang's, and Horses for Sources' are only a few of those. Above, an artist's impression of what the new SAHP would look like.
(Just kidding, it's a
NASA/ESA Hubble Space Telescope image capturing the chaotic activity atop a pillar of gas and dust, three light-years tall, which is being eaten away by the brilliant light from nearby bright stars. The pillar is also being assaulted from within, as infant stars buried inside it fire off jets of gas that can be seen streaming from towering peaks
- thought that it'd make a nice picture)

After last week's stats on Revenue, profit and R&D between IBM, SAP and Oracle, following Larry's misguiding statement on R&D at Oracle Open World, I thought it would be interesting to see how a new SAHP would do - there have been lots of words on HP taking over SAP, or even the other way around.
I'm not psychic and it may very well be just someone joining some firm, but the numbers are there and make for interesting stats:
  1. SAHP would have as much absolute revenue as IBM, SAP and Oracle combined (3% less)
  2. SAHP would have a lot less absolute profit (56% less)
  3. SAHP would have a lot less absolute R&D (56% less)
I'm just adding the figures from SAP and HP to SAHP here, no magic wand waved. What's causing these differences?
  • HP has a deplorable profit percentage of 8.8 %, compared to the others who average out at some 25%
  • R&D as a percentage of revenue is a mere 2.4% against an 11% average for the Big Three
Note: comparing average averages is tricky and not done, really, so don't compare these relative stats to the absolute figures please

Here are the combined figures (you'll want to click):

The short story on HP is that it once had a huge 1-to-1 ratio on R&D versus profit - and dropped that like a hot potato; it was a quarter of that last year

The long story is here: HP supplies Services, Enterprise Storage and Services, HP Software, Personal Systems, Imaging and Printing, Financial Services, and Corporate Investments

Let's recap that, in detail:
  • Services: the works, plain consulting and 20% outsourcing
  • Enterprise Storage and Services: hardware, server-side, 20% storage too
  • HP Software: software indeed, but vague - can't break that down into individual softs
  • Personal Systems: hardware, client-side
  • Imaging and Printing: 25% printers, and 75% "supplies" - ink?
  • Financial Services: leasing & financing
  • Corporate Investments: no idea
Now, onto the figures - again. Please bear in mind that there are some profits / losses unaccounted for, so not every sum will add up to a total of 100%, but it'll be close enough
Update 3rd of October 21:12 CET: please note that annual revenue and profit doesn't equal the segments sums

Absolute revenue and profit are fine, but not of interest, as they are hard to compare across years. The relative stuff is the really interesting bit.
Now, the lowdown:

  • Services: almost doubled
  • Enterprise Storage and Services: lost 1/3rd
  • HP Software: tripled
  • Personal Systems: on par
  • Imaging and Printing: lost 1/3rd
  • Financial Services: on par
  • Corporate Investments: on par
  • Services: increased by half
  • Enterprise Storage and Services: quadrupled
  • HP Software: from minus 3% to plus 5%
  • Personal Systems: tripled
  • Imaging and Printing: lost more than half
  • Financial Services: on par
  • Corporate Investments: from minus 3% to 0%
A word on the very last table: relative profit to revenue ratio. It is my magic comparison method as it perfectly shows the SWOT of each and every aspect.
If e.g. ESS takes up 30% of the revenue, it should account for at least 30% of the profit as well - otherwise it's money spent unwisely.
Basically, anything under 100% in there is a bleeder, and everything above is a winner - simple

Profit to Revenue ratio
  • Services: lost a bit, but still 25%-plus profitable - increasing venue over the years
  • Enterprise Storage and Services: bleeder, by a bit - can't seem to get that right over the years
  • HP Software: humongous turnaround, straight A
  • Personal Systems: improved from an giant bleeder to an enormous bleeder
  • Imaging and Printing: was extortionally profitable, now considerably less, but still over 50% above par
  • Financial Services: went from on par to a bleeder - years ago
  • Corporate Investments: huge bleeder once, very erratic, still a giant bleeder
That sums up my analysis of HP, pretty much. My advice? HP is serious about Services, no doubt. Immensely successful growing their Software, too. And still strong on the Printer biz

A marriage with SAP? Why not!?

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