HP's US sales 'not all bad, not all good,' says CEO

With the $13.9 billion buyout of IT outsourcer EDS now in progress, HP this week posted a strong second fiscal quarter across most of of its wide-ranging product areas, despite experiencing what CEO Mark Hurd called a "spotty" US market.

With total revenues of $28.3 billion, Hewlett-Packard increased its earnings per share by 24% over the same quarter last year, Hurd said in a conference call with financial analysts yesterday afternoon.

HP's revenues stepped up by 16% each in EMEA and the Asia-Pacific, and even grew 4% in the Americas, said Catherine A. Lesjak, executive VP and CFO. Still, though, the vast majority of HP's revenues -- 70 percent -- came from outside the US, mirroring trends also evident in recent financial reports from other large IT companies.

"[The] US, to be specific, was just spotty. We had some very good numbers in the US," according to Hurd, who mentioned "positions of strength" in the US for HP's storage, printer, and "business critical" systems.

"I usually try to make it a little bit more concise but the US is a tale of many stories, and spotty would be the best way I'd describe it. I wouldn't describe it all bad, but I wouldn't describe it [as] all good, either," he said, during a Q&A session with analysts.

"I would not want you to walk away from the call with, 'HP said the US is all bad.' That's certainly not what we are seeing. We are seeing spotty results in the US It's a little different by industry. It's even a little different by geography and it's a little different by business unit, and within that I can tell you a storage story, I could tell you a business critical systems story, an inkjet story, and it's just a mixed bag," the CEO said.

"And then within that, we frankly spun the dials to the opportunities that we saw...in the market," according to Hurd. "While we look at countries, we look at optimizing the entire business as we go, and that's what we did."

Overall worldwide sales were particularly bright for laptops, which grew 31% over the year-ago quarter. Sales were also up across most other product lines, with the exception of PC desktops and industry standard servers, which remained flat.

Hurd also indicated that, in HP's pending merger with EDS, HP expects that EDS will provide major contributions in landing enterprise accounts in the US -- and possibly in expanding the presence of HP's IT outsourcing business within the offshore outsourcing market in India.

"We are a great engineering and great customer support company, but we have a market coverage problem, and I've spoken to you many times about our efforts to improve our enterprise account presence, especially in the US. We expect this deal to significantly improve our enterprise share of wallet and create a platform that gives us opportunities for new business growth," he told analysts.

"Second, we believe that the cost synergies from this business combination are significant and make this transaction very financially attractive, even without the expected revenue benefits."

Hurd said later in the call that HP anticipates the EDS merger will allow for substantial consolidation of the company's internal data centers.

"In terms of India, both companies have a footprint there but we are less -- sort of -- these days...We are still bullish on India. [But] obviously EDS has been bullish on India. They've got some 40,000 employees there," said Hurd. "But we continue to optimize to best shore locations as we think it makes sense."