How HP’s Enterprise Services Performed in 3Q15
Amid 3Q15 Disappointments, HP Keeps Big Plans on the Horizon
Double-digit decline
Previously in this series, we discussed individual operating segment’s performances and contributions to The Hewlett-Packard Company’s (HPQ) overall revenues in 3Q15. So far, we’ve looked at Hewlett-Packard’s (commonly known as HP) Printing’s, Personal Systems’, and Enterprise Group’s performances. Now let’s look at how the company’s Enterprise Services performed in 3Q15.
HP’s Enterprise Services revenues fell by 11% on a YoY (year-over-year) basis to $5 billion. Both of the segment’s sub-segments—ITO (infrastructure technology outsourcing) and ABS (application and business services)—posted declines in their 3Q15 revenues. As tables below show, ITO and ABS revenues declined by 13% and 7%, respectively, in 3Q15.
Shift toward cloud computing
HP’s Enterprise Service Group’sITO business is facing tremendous pressure as companies are rapidly moving toward cloud computing solutions. Amazon Web Services (AMZN), Microsoft Corporation (MSFT), IBM (IBM), and Google (GOOG) collectively controlled approximately 54% of the global cloud infrastructure service market in 2Q15.
HP CEO Meg Whitman recently articulated that, as companies move rapidly toward a “consumption,” pay-for-what-one-uses IT model, HP’s Enterprise Services labor force and data centers would face dramatic changes. Whitman further stated that this would require the company to “make a faster mix shift to low-cost resources” in order to transform “the physical data center footprint to a much more streamlined footprint that is far more automated.”
HP’s Enterprise Services has reportedly lost approximately $4 billion in annual revenues since 2011. As a result, this segment has taken the brunt of the layoffs HP announced on September 16, 2015.
If you’re optimistic about HP, you might consider investing in the Technology Select Sector SPDR (XLK), which invests about 1.25% of its holdings in the company.
In the next part of this series, we’ll look at how HP’s software division performed in 3Q15.
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