HP Untarnished by Silicon Valley Sideshows

Shares of HP moved up Tuesday — while most tech stocks were down — after the company posted strong results. The message boards were upbeat on CEO Leo Apotheker’s first earnings call. The drama of Larry Ellison’s attempt to subpoena Apotheker for the Oracle vs. SAP trial seems to have left little dust on HP.

The company reported net revenue of US$33.3 billion for its fourth fiscal quarter, up 8 percent over the $30.8 it logged in the fourth quarter of 2009. For the year, HP hit $126 billion, up 10 percent over its 2009 performance of $114.6 billion. Net earnings for the quarter were $2.5 billion, up 5 percent from last year’s $2.4 billion. Net revenue for the year hit $8.8 billion, up a hearty 14 percent from last year’s $7.7 billion.

Tough Times May Be Over for Enterprise Market

HP’s performance comes off three years of tough times for tech companies that cater to the enterprise market. Companies are beginning to upgrade, which has worked in HP’s favor through 2010.

“HP’s profits are up. This is to be expected. It is rebounding from the severe austerity of the past three years,” Laura DiDio, principal analyst at ITIC told the E-Commerce Times. “You would expect HP, as well as Intel and IBM, would do better this year. You can only put off updating your IT for so long.”

The reaction to HP’s performance was positive but mild.

“What gets me is you have to beat the street’s expectations,” noted DiDio. “If HP went up 15 percent and they were expected to go up 15.5, the street wouldn’t like it. Revenue of 33.3 billion and profits of 2.5 billion are very respectable.”

During the earnings report, the street got its first glimpse of Apotheker at the helm. He has kept a low profile during the past few weeks as Oracle CEO Larry Ellison attempted to serve him with a subpoena to testify in its court case against SAP regarding his time as an executive there.

“The man has been in hiding,” remarked DiDio.

So far, it doesn’t look like the drama with Oracle has tarnished HP.

“HP would have to go a long way to look bad when the other combatant is Larry Ellison,” DiDio quipped. “HP has a large amount of Teflon attached to them.”

Apotheker praised the company’s talent in the earnings report.

“Let’s hope HP values its talent and doesn’t keep cutting, cutting and cutting its employees,” said DiDio.

Apotheker Rises Above the Fray

If the drama with Ellison has had any impact on Apotheker or HP, it certainly doesn’t show in the earnings report.

“In its performance, the drama doesn’t matter. HP has a corporate office that oversees independent-like firms, and they remain untouched by Ellison,” Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times.

“Much of what we’re seeing is historic financial performance right now,” he noted. “The PC market is looking good, so it seems the drama between Larry Ellison and Apotheker is just drama. If they continue to tie up Apotheker, they can render him ineffective by chasing him around with process servers.”

In his earnings discussion, Apotheker mentioned there will be a greater emphasis on software going forward, “taking a page out of Oracle and IBM,” said Enderle. “That will be a strain on their relationship with Microsoft, which is in its separation phase.”

Looking harder at software may indicate HP could be gearing up for more acquisitions.

“The company that would be most interesting for HP to buy would be SAP,” said Enderle. “Oracle may drive SAP to HP. There could be an acquisition or merger. HP would be the ruler. They would encompass it.”

A major change, such as HP buying SAP, could be an unintended consequence of Ellison’s hectoring.

“If Larry pounds both companies, they may draw together. It could be a close relationship, a merger or acquisition,” said Enderle. “I’m expecting one of the three.”

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