Fiorina touts HP advances
Figures show retreat
Hewlett Packard's CEO Carly Fiorina has been spinning like a top to impress us with market share gains. But it's hard to see that the blessed good news is a result of anything other than cost cuts.
"We are now growing our business, and all of our businesses are profitable," Fiorina told a technology seminar in Singapore today.
"Our competitive position continues to strengthen with market share growth in virtually every one of our businesses and our regions around the world."
She applied top-notch marketing savvy to HP's recent performance in her address. The CEO boasted of record cost savings as a result of the Compaq acquisition and dangled impressive market share gains in front of the Singapore crowd.
HP has cut $3.5bn in in costs one year after the close of the Compaq deal. This was $1bn more and 12 months ahead of HP's ambitious pre-merger schedule.
But Fiorina has a harder job deflecting claims that the Compaq buy was only a dilution mechanism for HP's money-gushing printing and imaging business.
It's true enough that HP has managed to increase sales and profits in several key areas. Fiorina's leadership no doubt helped the company stay steady while many warned it would implode from the merger.
Given these areas of success, it's unclear why HP insists on bringing up the market share stats again again. We've done a bit of digging and have discovered that HP's competitive position is not strengthening across the board as Fiorina suggests.
The most recent revenue data from IDC shows that HP lost market share in the server business during 2003. HP held 28 per cent of the market in 2002 and dipped to 27.3 per cent in 2003. This came while market leader IBM increased its share from 29.3 per cent to 31.6 per cent.
In storage, HP lost share as well. It finished 2002 with 26.4 per cent of the worldwide market but ended 2003 with 26.3 per cent of the market. It's a miniscule decline, but declines do not growth make.
Who actually did gain share? We'll give you one guess.
Yep, IBM surged from its position with 19.2 per cent of the market in 2002 to hold 21.6 per cent of the market in 2003.
The most recent data from IDC in the PC market tells a brighter story for HP. It increased overall share from 16.0 per cent to 16.4 per cent year-on-year. Pucker? Well, Dell increased its share from 15.1 per cent to 16.9 per cent to take the overall lead.
And what about the services business? You'll remember that HP was to become a services powerhouse after buying Compaq.
In its first quarter this year, HP's services unit managed a 6 per cent year-on-year revenue rise to $3.2bn, but profits dropped 11 per cent. The financial services business also saw revenue decline 15 per cent.
"Services profitability was notable weaker than expected," said Toni Sacconaghi, an analyst at Sanford Bernstein, at the time of HP's earnings report.
The reality is that, while HP's businesses are at last profitable across the board, printing and imaging is by far the only big success story. This point, no doubt, is not lost on IBM and Dell. Almost every set of data shows them outperforming HP by leaps and bounds since it acquired Compaq. Ironically, the acquisition was meant to help HP beat IBM on large deals and compete better with Dell on the low end. No such luck.
Fiorina insists on pointing at cost cuts because that is one of the few areas where analysts respond to HP's post-merger work. But these cuts have come at the cost of employee morale and in some cases technology development - note the delays in bringing Tru64 features to HP-UX and cancellation of a new Alpha chip.
Just this week, HP called for workers to "share their opinions and ideas" in the company's Voice of the Workforce survey. We look forward to sharing those results with you. ®
Sponsored: Network DDoS protection