Original URL: http://www.theregister.co.uk/2006/05/16/hp_q2_2006/

HP halfway through cull - Hurd

Cheery Q2 earnings

By Andrew Orlowski

Posted in Financial News, 16th May 2006 23:56 GMT

Retirement security may be a fading memory for many Hewlett Packard employees, but the company cheered Wall Street with increased revenue and profits today.

Its Q2 numbers showed revenue up five per cent from a year ago, to $22.6bn, while profits rose 51 per cent from the same period to $1.46bn. The increased profits are at the expense of lower margins, and what Hurd likes to call "expense discipline".

HP is halfway through its staff cull, CEO Mark Hurd announced during a conference call this afternoon. HP has shed 8,100 of the 15,300 staff Hurd said would go last July, or 53 per cent.

But don't look at the numbers, he stressed. It's where the jobs are that gives a truer account of the expenses. Translation: we're sending more jobs offshore. The reductions in benefits HP announced to widespread dismay in the company are now complete, however.

Revenue growth was solid if not spectacular in most areas, although the PC division offers the brightest numbers. Personal systems revenue rose 10 per cent, with HP riding the demand for consumer laptops, while profit margins rose to 3.6 per cent. Printing revenue rose 5 per cent year-on-year, with margins rising to 15.5 per cent. Services and finance revenue was more or less flat, while healthy storage performance was offset by the continuing decline in big iron, 7 per cent year-on-year, with lack of demand for PA-RISC and Alpha systems cited.

That's the consequence of strategic decisions to neglect its own processor architectures in favor of Intel's Itanium. But poor application software support for Itanium and lingering doubts about its future mean that it's been a hindrance, not a help to HP, when it comes to attracting enterprise business.

Hurd was specifically asked what HP would do when Intel finally discontinues its multi-billion dollar 64-bit albatross.

"I have no indication nor would I want to speculate on that," said the Hurd. "The last big discussion I had with Paul Otellini was about the investments we're making together. So we'll continue to try and grow our Integrity server line."

HP's Mr Motivator is so fond of the phrase "expense discipline" that he said it several times in a brief introduction and during the shared Q&A with analysts that followed the earnings statement. Even more so than his previous favourite, "aligning the business". We note that the expense of maintaining Itanic has outlived the expense of HP's pension promises to its staff. ®