HP posts Q3 2012 fiscal results, brings in $29.7 billion in revenue, loses billions on paper | webOS Nation
 
 

HP posts Q3 2012 fiscal results, brings in $29.7 billion in revenue, loses billions on paper 18

by Derek Kessler Wed, 22 Aug 2012 7:37 pm EDT

HP posts Q3 2012 fiscal results, brings in $29.7 billion in revenue, loses billi

Hewlett-Packard today posted their results for the third quarter of 2012, raking in $29.7 billion in revenue, but still posting a loss of $8.9 billion. That $8.9 billion includes an already announced only-on-paper $8 billion write down on EDS plus a few billion more thanks to depreciation of the Compaq brand, so for the May-July period of this year HP netted a profit of $2 billion.

The $29.7 billion in revenue was more than expected, but is a drop in 5% from the year prior. That said, last year's earnings announcement landed right as HP announced CEO Leo Apotheker's plan to split HP into two, along with killing off webOS hardware development. The $8.9 billion (or $900 million, depending on how you want to slice it) loss is a significant swing from last year, when HP netted a profit of $1.9 billion. HP's earnings have declined from the year prior every quarter of the past year, though the combined $10.8 billion in write downs artificially depressed this quarter's earnings.

So while nearly $11 billion in paper losses is a bad thing, the outlook for the coming quarters is even worse. Personal Systems Group, which is responsible for a large chunk of the revenue ($8.6 billion) but only $409 million in profit, saw revenue and earnings from the same quarter last year drop by 10%, with no bottom in sight as desktop unit shipments dropped 6% and laptops 12%. Imaging and Printing saw earnings drop but profits rise, but future results will see those earnings merged with PSG as the new Printing and Personal Systems Group under Todd Bradley.

CEO Meg Whitman painted, as expected, an optimistic picture for the future of HP, saying that, "HP is still in the early stages of a multi-year turnaround, and we’re making decent progress despite the headwinds." Headwinds being the destruction of significant value in the Compaq and EDS brands, a likely upcoming multi-billion dollar write down from the Autonomy purchase (even with revenue increasing by 18%), and the continuing decline of HP's computer unit at the hands of mobile computing (wouldn't webOS be useful now?) and enormous pressure on the flagship printing unit thanks to, well, people not printing anymore. But as Whitman makes clear, the quarterly report isn't everything, HP's focusing on the long-term picture.

Source: HP

18 Comments

"and the continuing decline of HP's computer unit at the hands of mobile computing (wouldn't webOS be useful now?) "

To flush more money down the toilet?

The only interesting thing there from a webOS perspective is that she is talking about shutting down small non-critical projects - so I'm guessing that gram has a short lease to start making money.

You're wasting your breath. People are completely blind to the reality that webos was a money loser. Thus the only thing webos was doing to HP's computer unit was widening the loss not shrinking it. They'll justify their thoughts by simply ignoring statements to the contrary from reliable sources or just claim people are lying.

I read the transcript of the conference call. What's really telling is I don't think that webos, palm, open webos or gram were not mentioned at all.

webOS is a great product, but poor management and lack of vision never really gave it a chance.

It's not all about the OS, hardware maters just as much and webOS neve rhad good hardware. It's not all about the concept and innovation, implementing is important too, and webOS was never really finished, which brings me to the real cause of all the trouble:

Deficient management.

Ed Colligan who destroyed the Treo line with Windows Mobile and didn't see the iPhone as a threat, he didn't get what people want, even when the Palm Centro (running the aging Palm OS 5) sold over 2 million units he still made Windows Mobile phones.

Instead of upgrading Palm OS he just waited.

When he finally understood that Windows Mobile was doomed to fail Palm abandoned Palm OS 6 and started working on a new OS, they didn't do much with that one eider so after even more time, they finally started something good with webOS.

But they rushed it out, it was unfinished and the hardware was miserable on the Palm Pre. They failed to negotiate with Verizon and launched on Sprint instead. Big big mistake, they would have been better of waiting and staying alive with another low cost Palm OS device with a few tweaks to the OS.

Jon Rubinstein was even worst, at least Ed Colligan kept Palm alive, he sold it to HP. Blackberry didn't sell out and they can still have a shot to make it today, Palm could have had a shot too.

And at HP Palm saw it's worst management yet, poor advertising, poor products, long launch times and just slightly better hardware.

How could it have ever earned money? IOS didn't see any of these impediments, management was flawless, the software was complete and the hardware was pristine.

Of course HP is canning webOS for good, it's just another open source OS that no one uses now, no one is going to pick it up. No one will develop it further.

you can revisit history all you want. webos was not perfect. a lot of it was about webos. it was a good idea in some spots but as a whole product it was lacking in speed, polish, it now looks dated, lacked apps, variety of hardware, media, and bottom line is the public did not buy the products. there was no huge demand. it was losing money for both companies that had it. it was NOT helping hp. that's the point. it wasn't helping hp it was losing them money

The wider problem here is that HP as a company is not one that has the expertise or even the will to produce a smart-phone or tablet that can compete with any of the big players.

Yeah, to be honest, I'm just sorry that Palm is gone. An innovative company that could have made products that could rival Apples is gone. And they had what it took to succeed, thay just didn't play their cards right... no pun intended.

Now Apple is the only place to get quality. And I for one really miss my Treo, even with an iPhone in my pocket.

and every single market they are in has next to no growth and has declining profits. It was a problem before they bought palm and is one now. And in a recession almost every other similar tech company was facing the same issues, like Dell, Sony, etc. Plus in a recession corporate tech spending plummets which means no new computers or printers. And home consumers aren't buying printers much at all. They are GM selling giant Buicks when the world has moved on to small Japanese cars.

Every PC manufacturer is going through the same pain right now, but HP's reliance on printer and server income gives them additional revenue sag areas.

It's a perfect storm of tablets being more useful and popular than ever, laptop sales dropping off until Windows 8 kicks into full gear, and a bad economy slowing both consumer and corporate purchases.

Even for strictly mobile companies, it's rough. HTC is finding themselves unable to compete in the premium device space and is beating a hasty retreat toward cheaper devices. RIM....well, 'nuff said. Nokia shareholders now are reportedly considering staging an effort to oust Elop as their wealth disappears.

Everybody's tightening the purse strings, so webOS would've been cut off at the knees whether Leo and the board killed it last year or not. Can you imagine them booking an additional $2-$4 billion loss on top of the charge they took this quarter because they were still spending (and losing a lot of money) on webOS and trying to build an ecosystem for it?

People need to remember that "AND THE BOARD" part because the board includes Meg Whitman. Most of the people who put a full stop to webOS devices are still there. And looking at how the mobile market has gone right now, there's no wonder why they did it. Continuing to make webOS devices would have simply been yet another collapsing front in a war that they (and most of their competitors) are slowly using. The only possible winners are people who put in the work to establish ecosystems (e.g. Amazon, Apple, Google, Microsoft) or people who own the supply chain and develop their own components for a premium experience (e.g. Samsung). HP is neither.

i agree. People also act like Leo acted alone. His board approved the the shutting down of webos too. not only that of all the leo moves they went back on that one was not one of them.

I believe the point posters are making is not so much that webOS was destined to be a slam dunk success, but that by bailing out so early, HP guaranteed failure. Palm (in my opinion) was never going to be able to successfully carry the torch - the best they could hope for was to have moderate success and sell out to a bigger entity. None of the phone-only vendors are successful and it has not been possible for a few years now. If you know of one, please enlighten me. (Maybe Samsung right now, but see how that will change when Google starts selling their Google-rola hardware)

They were operating on a shoestring and cutting corners in the worst possible places. That is a criticism, but not a harsh one. It's easy to say what should have been done when 1) I don't have the complete set of financial data their exec's had and 2) I don't know what the procurement and technical challenges they were facing in relation to the financial crunch they were in. I don't know.. .and the "boo-birds" out there don't know anything more that the stuff we all read online either.

It is known that HP management problems proceeded their acquisition of Palm. They did not have a plan to adjust to the changing marketplace and they are one of the few companies that has enough other entities that they could have been successful. So their efforts were poorly made (that is a matter of public record now) and the results were obvious.

So the hue and cry was that by dumping webOS, HP was going to right the ship and become uber-successful. But since it was a management problem more than anything else, how is that working out for them? If they has iOS they could not be successful. Now they have no credible strategy going forward. I'll give the haters some credit - throwing money at something does not insure success. HP overpaid for Palm, overpaid for Autonomy, overpaid for Compaq, and none of them have been successful for them.

'Nuff said. ... C

I think the point "haters" are making is that no one has yet proposed a viable, credible alternate path to success for webOS. No one on this forum. No company kicking the tires and looking to acquire or license the product. Not HP themselves.

Companies with GREAT reps in the mobile industry (HTC, Nokia) are experiencing slow sales even on their flagships. Doesn't matter whether it's with an established OS like Android (One X) or with a new OS like Windows Phone (Lumia series). Doesn't even matter if they launch at $99-$149 to undercut iPhone and the Galaxy S III. So it's safe to assume that a newbie like HP and the Pre series, which had pretty negative branding, would have met a similar if not worse fate had they never canceled it.

Same goes for tablets. The vast majority of marketshare belongs to Samsung, Amazon, and Apple. Everyone else is shipping a few hundred thousand or less every quarter and not selling through completely. You think a Touchpad Go might have changed things at a lower price? The Kindle Fire and Nexus 7 would've mopped the floor with it, and if they didn't....here comes iPad mini. I didn't even mention the Surface, which Microsoft is shipping three million of with plans to sell each and every last one of 'em.

Too much time was spent trying to correct the mistakes of 2009 when the market of 2012 is a completely different and fiercer animal.

Half and half on your comments. There were LOTS of alternatives mentioned. If or not they would have worked is a matter of conjecture. To say that they would have for sure is too audacious for my taste. But to say that all of them would have failed is equally audacious.

Biggest problem for Palm at launch was the crappy hardware. I was in stores and saw people walking in on their 30 day trial windows returning devices because of QC issues. Anecdotal? Yes, but I buy phones for my company. Don't have to accept that, but just search the forums here to see how many of even the FANS of the OS were driven away by a poor hardware experience. The software could have been improved and should have been regularly. Everyone else (Google and Apple) kept improving. I've also used Android phones from the inception. The first versions were horrible but they cranked out improvements to software regularly and rapidly. Palm should have done the same. Perhaps, financial constraints limited them, I don't know. But it killed their early momentum when they were still the critics choice.

Microsoft has long been making the mistake of living in the past. If Apple had tied the iPhone ecosystem as tightly as Microsoft did to the it's OS, I suspect they would have been in the same boat. I've used the earlier versions of their mobile OS. It was all Windows lite, and Windows poorly done. Psychologically, it is hard for companies to take a chance away from their "bread and butter" . Microsoft could have done Android as easily as Google, perhaps even easier. But, it was a LINUX based OS, a no-no in Redmond where it has to be based on Microsoft OS. (Funny, now they are trying to tie the mobile OS to the X-Box... do they thing this will be their "iPod to the iPhone equivalent?)

Totally agree with the timeline argument. It is one I've made many times. It is why HP no longer has any real shot at success. What would have led to success in 2009 is no longer good enough. But what Apple rolled out in the original iPhone would not be successful if they were starting with that today either. Had a friend, an older guy who was paying $178 per month on his mortgage. Even a cheap house in that neighborhood now would have a mortgage of no less than $2,000 per month.

Kind of like the mobile tech scene. Everything is more costly than it was even just 2 years ago - R&D, components, vendor channel development, marketing, litigation costs, etc. HP is not in a position financially or in terms of having a galvanizing, visionary leader to pull it off.

True, but your explanations prove my point. Every alternative scenario for webOS being a success is predicated on things that weren't exactly "choices" for Palm to make in 2009.

They didn't have the option of launching on multiple carriers or making better hardware or pre-empting Android on Verizon or launching sooner or launching less buggy software.

These were all things they HAD to do or their demise as Palm would've arrived even faster. Time was never on their side. They were doubly unlucky to attempt this during the rise of Android. Apple set the clock in 2007 and the only one able to keep up with the pace offering timely and formidable competition thus far....is Android. That was never an option for Palm given their lack of cash and poor finances. It wasn't an option for HP given how slow they moved and how they were unprepared to create a supporting ecosystem.

How did they NOT have the option of making better hardware? How did they not have the option of not continuing to improve their software? How did they not have the option of not making the 'rise of Android" the re-birth of Palm? How does announcing a product and then waiting 6 months before hitting the street not hurt as opposed to waiting until you actually are ready to roll? How could not selling their concept to someone with deeper pockets sooner not have given them the backing to do what they needed to do?

It's easy to look at how things played out and assign an air of inevitability to the outcome. But that pre-supposes that nothing Palm would have done would have changed the perception of the market place to the product at any point in the process.

If Palm had provided a credible alternative to the iPhone how would that have affected the acceptance of webOS vs other platforms?

Is Android keeping up with Apple or are they merely the only viable alternative? If you consider the fact that purely form an OS perspective, Google has not made a penny of profit but has instead lost money on the OS development, aren't they merely taking a loss on the mobile side with the hope of making it back on advertising? For example, I was using the technology behind Google Voice before Google owned it. It was known as Grand Central at that time. How many millions has Google lost on that technology it now uses as a value added feature of their mobile OS? They don't generate a penny of profit by selling the service? The same will be true with Windows phone and Skype to a lesser degree.

There a lot of issues that haven't been addressed. Some are unknowable, others could have gone either way.

How did they not have the option of making better hardware? Because it took the engineering mistakes and successes of the Pre 2 to make the Pre 3 and the Veer. And it took the same of the Pre Plus to make the Pre 2. And so on all the way to the original Pre. Each successive slider was a little more solid and ergonomic than the last.

Same for the software. It took a lot of time to get to the webOS we have today with a pretty tiny engineering core. The first public versions of webOS were pretty raw, which answers your question about waiting 6 months. Same for selling when they could. They had to get a viable product to market first.

The common theme here is that Palm had the drive, desire, and ingenuity, but didn't have resources and time.

HP had resources, but had even less time to execute and had no drive, desire or ingenuity.

It's odd that you think Google hasn't "made money" from Android. The OS always was and is a trojan horse. It puts Google services (e.g. Maps) and ads everywhere and makes them ubiquitous. That's the win. They were smart enough as a search and services company to see the shift from the desktop to mobile coming.That's where all of the eyeballs they needed to make money were going....

And they got ahead of it. Plus, they got the handset makers of the world to make some pretty great handsets by keeping an open, anything goes model. Palm thought they could make a better product following the Apple/vertical integration model instead.

They were right. But that's all it was.

Again I'm half and half here.

By saying that they "needed" the poor earlier devices to make better ones is a pass that I'm not willing to give them. That is a model only if you are willing to spend tons of money. Palm couldn't spend that way and HP was not not willing to throw down that type of money. (But to be fair to HP, by the time they were at the Pre3, they would have needed to throw in lots more money than would have been necessary originally)

From the "you only get one chance to make a first impression" department, I would have waited to release at least a respectable product rather than one the sealed perception about the brand. One day, someone will enter the phone or tablet market with a device that have a measure of success and blow away the "gotta get it out now" argument.

Totally understand Google's strategy. But the point remains that the OS was not a money maker and still is not, but is very expensive to maintain. Palm/HP could have done the same thing (alternate revenue stream) with an outsourcing model. The profits would not have been as great, but it would have been better that what they did. This is the marketing in the true sense of the word, not just running "Borg Queen" ads and calling that marketing. Not that any of those partnerships would be permanent... but nothing in consumer tech is any more. But it would have bought them time and additional opportunities.

For example, it's too late now, but at the time there was space for a tablet/color e-reader partnership. They get to that party late and partner with Borders (the late Borders). All of the players who are on the outside looking at Google roll over them could have been persuaded to partner with a (at one time) respected company. But they let those opportunities pass... Yahoo, Facebook, Mozilla, Amazon, etc.

Google has generated enough fear that a savvy marketer could have built a coalition that partnered up against them where each would have needed to invest less to protect their flank. But Palm was so obsessed with Apple, they ignored Android. Another thing if they had handled differently, would (or more correctly, COULD) have changed their trajectory.

C

I just think it was never ever gonna do what they needed, carry them to larger profits like ipads do for apple, because the demand for webos was not great outside of the small loyal community and the investment required to make it was one, hugely speculative, and two hugely expensive. I thought if they licenced it they had a chances but the make hardware so they were never gonna do that.

Just a note Samsung sells a hell of a lot more then phones. They are more like General Electric. They build buildings, bridges, oil tankers, washers, TVs, clock radios, dryers, ovens etc all along with phones. So they make more then phones. But also samsung has economies of scale cause they make almost the entire phone themselves. the main chip, the glass, the boards, the memory. That makes them real flexible and pretty profitable. They aren't like HP that has to buy all those components from a Samsung or an LG and can't get all the top components.

spot on about overpaying for companies. But HP has been poorly run in many areas for a very long time. I just think it was declining and Palm was not big enough yet to be the answer.

When was the last time Palm made a quality product? They have been releasing hardware with qc problems for a very long time.