Mark Hurd is finally starting to look on the bright side. The boss of HP has been one of the most cautious tech CEOs in recent weeks, but when I caught up with him moments after the company put out its latest quarterly earnings today (the headline numbers were pre-announced earlier this month) he was sounding uncharacteristically relaxed.
You have to be a student of Mr Hurd’s normally dour style to understand just how optimistic he can make it sound when he says he’s feeling “a little more positive”. He said there had been a continuing rebound in the US in the latest quarter and “good sequential improvement in Asia in most markets”.
The one thing preventing Mr Hurd from feeling downright happy, in fact, is Europe.
In the US (where revenues were down only 3 per cent from a year ago) and Asia (down 1 per cent) the recovery is clearly starting to take hold. In Europe, though, revenues were off 17 per cent, with little evidence of improvement:
For us to get more excited we’d have to see the same kinds of trends for a period of time in Europe. There are some [European] markets where yes, there is some improvement, but on the whole we’d like to see more signs over a longer period of time.
Against that background, Mr Hurd still looks like he’s setting some very cautious financial targets, despite the change in rhetoric.
When HP pre-announced that its earnings would be stronger than expected it also raised its guidance for next year. But as Tony Sacconaghi of Sanford C Bernstein pointed out on today’s analyst call, the company’s guidance for its first fiscal quarter still implies a sequential revenue decline of 3 per cent – and that is despite the slight seasonal improvement it normally sees in that period, as well as a more favourable currency picture.
For HP, the latest quarter was all about the productivity improvement in its services division (operating profits up nearly five percentage points, to 16.2 per cent) and further market share gains in PCs (limiting the PC revenue decline to 12 per cent, which in this market counts as a victory).
If the cycle does turn faster than Mr Hurd is currently allowing, improvements like these in its underlying competitive position should make it well-positioned for a strong rebound.
