HP services revenue declines as company readies litigation fund

HP has reported first quarter net revenue of $28.2bn, down 1%, while revenue in its Personal Systems division grew 4% year over year

HP has reported first quarter net revenue of $28.2bn, down 1% from the prior-year period.

Revenue in its Personal Systems division was up 4% year over year, while revenue in its enterprise group grew by 1%.

HP reported Enterprise Services revenue of $5.6bn down 7.3% year over year. In a transcript of the earnings call on the SeekingAlpha financial site, HP CFO Cathie Lesjak said: "The revenue decline, along with the investments we are making in our salesforce and increased litigation reserves on legacy accounts, pressured our margins in the quarter."

HP reported double-digit growth in its cloud and Vertica products and Autonomy's Idol product. Support sales declined 2% year over year as a result of historical licence revenue declines. Professional services sales declined 12% year over year, but the gross margin improved as it continued to prune the portfolio and focus on profitability, said Lesjak.

"In the enterprise group, we remain focused on more successfully managing the margin profile and we expect continued traction in networking, converged infrastructure and converged storage. In enterprise services, we expect the delayed key account run-off to continue to pressure growth and profitability as we drive forward the transition from reactive to proactive sales," she said.

Commenting on turning around the services business, CEO Meg Whitman said: "These are long-term contracts, so it takes a little bit longer to turn the ship around."

Whitman said the sale of IBM’s x86 server business to Lenovo in February was an opportunity for HP. "We have a near-term opportunity here to gain share in our enterprise services or server business, so we are all over it."

As Computer Weekly has previously reported, the fourth quarter 2013 Europe, Middle East and Africa (EMEA) ISG Outsourcing Index recently reported a trend toward increasing numbers of outsourcing contracts, but declining contract values. 

Despite the number of outsourcing contracts signed in the region rising by 18% during 2013, the collective value of these deals fell by 6% compared with 2012.

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