So What Should a Turnaround at HP Enterprises Look Like?

A turnaround is going to be gradual. a progression, an evolution. Perhaps it would look like this …

1. most recent quarter posted shows Y-o-Y growth
2. four most recent consecutive quarters posted show Y-o-Y growth
3. most recent posted quarter is a record quarter
4. four most recently posted quarters are records

Well looking at HP ISS …. and this format might be strangely familiar to some of you: dark green highlighting indicates +ve Y-o-Y growth; red, negative.

Green good, red bad. Still with me? Yes?

Green with yellow bolded font shows record quarters; light green indicates weak +ve growth between 0-2% … the reason for this will be clear when we look at HP Storage.

1. most recent quarter posted shows Y-o-Y growth – YES
2. four most recent consecutive quarters posted show Y-o-Y growth – NO
3. most recent posted quarter is a record quarter – YES
4. four most recently posted quarters are records – NO

So in the past 8 quarters there has been quite a lot of dark green: 7 of the past 8 quarters have shown growth which came after 8 consecutive quarters of red. So ISS clearly is showing signs of a turnaround, whereas looking at HP Storage:

1. most recent quarter posted shows Y-o-Y growth – NO.
   – The trouble with storage is that the only quarters that they’ve shown growth have been <2% of which there have been no less than four. Excluding those, HP Storage hasn’t shown significant (i.e. >2% Y-o-Y growth – dark green) since 4Q 2011.
2. four most recent consecutive quarters posted show Y-o-Y growth – NO.
   – 5 of the past 6 are red; 10 of the past 13 are red.
3. most recent posted quarter is a record quarter – NO
   – most recent record quarter for a quarter was back in 1Q 2011, and for 2Q through 4Q, back in 2008.
4. four most recently posted quarters are records – NO

So that’s pretty clear. No turnaround there. But what about Technology Services, HP Enterprises’s “crown jewel” according to Meg Whitman:

1. most recent quarter posted shows Y-o-Y growth – NO
2. four most recent consecutive quarters posted show Y-o-Y growth – NO
3. most recent posted quarter is a record quarter – NO
4. four most recently posted quarters are records – NO

Just lots of red. Well, that seems pretty straightforward. It’s just not a “great business”. And since we have mentioned them, just to complete the picture, let’s add HP Networking:

1. most recent quarter posted quarter shows Y-o-Y growth – NO**
2. four most recent consecutive quarters posted show Y-o-Y growth – NO
3. most recent posted quarter is a record quarter – NO**
4. four most recently posted quarters are records – NO
   – Although while it should be noted that in 2014 all four quarters were record, they were only marginally higher than the previous three years. Indeed 1Q & 2Q of 2015 were the worst quarters for HP Networking since 2010.

**I’ve excluded 3Q 2105 because of (a) non-organic growth was only cited with currency impact excluded (and so isn’t consistent with everything else above) (b) the impact of acquisitions – and not just because there is non-organic growth that has been rather expensively paid for, but think about it: also the core business is now highly incented to perform, particularly if “adopt -and-go” is the integration approach for overlapping product segments, i.e. they had better grow or they are out ….

So why was HP Storage and HP Enterprise Services’s non-existent turnaround highlighted so much in the quarterly call?