Hewlett-Packard Company (HPQ)’s Software Business in Difficult Transition Phase: Meg Whitman

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Hewlett-Packard Company (NYSE:HPQ) reported a revenue of $27.6 billion in third quarter, which was up by 1% year-on-year. They also reported $1 billion in net earnings, which was down by 29% on the year. Revenues got a big boost from the surge in PC sales towards the end of the quarter, mainly due to expiration of Windows XP support.

The boost in PC sales was just an one time event, which might not help out their numbers in the quarters to come. So Meg Whitman, CEO and President of Hewlett-Packard Company (NYSE:HPQ) shifted her focus on software business to take the company forward. Whitman talked on CNBC about her plans to grow the software business and her vision for the company.

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“[…] Software is in the middle of a very difficult transition from traditional license model to SaaS, and so we have a portfolio that has to move from license to SaaS. We have some good products on that regard, but that’s going to have some choppiness on the top line, because as you move from a one time upfront payment to payment over time. It changes the financial architecture,” Whitman said. 

She pointed out that this transition might need some time to reset the financial model of the organization. She thinks that PC sales are not dead yet and she pointed out that the sales in that market was purely based on the market share that the company holds. She feels that PC market is a flat to declining market with a lot of small pockets of growth and proper utilization of those pockets might yield some benefits to the company.

Printing has been the business with  highest margin for Hewlett-Packard Company (NYSE:HPQ) for quite some time. Whitman said that printing was one of the more profitable business for the company. She said that both the ink and toner based printer sales are getting stabilized and she was more excited about the advancements in the ink. She pointed out that the latest ink printers from HP are twice as fast as laser printers, but with the best ink quality and almost half the cost. She believed that many companies would be interested in such printers.

One of Hewlett-Packard Company (NYSE:HPQ)’s top shareholders is Relational Investors, managed by Ralph. V. Whitworth, which owns  around 27.8 million shares of the company.

Disclosure: None

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