Apotheker looks to double (or triple) HP’s software business

Leo ApothekerLooking for clues as to what direction new HP CEO Leo Apotheker will take the company? Speaking with press and analysts after the company announced its fourth-quarter results, the new chief provided some pretty heavy hints, and ones that shouldn’t be surprising, given his background with software giant SAP.

“We need more software both as a category and also across the portfolio so that we can differentiate our individual products and services,” said Apotheker. “We have an opportunity to better integrate our software and services strength across the company and we will be focusing on that.”

Although the company has a sizable software business, it accounted for only three per cent of the company’s fourth quarter results. Apotheker said that “doubling it wouldn’t be bad,” but that ultimately, “tripling it would be even better.”

Apotheker spoke of using its software intellectual property more across the business as a way of differentiating itself in the market, and said the company would look to grow its software business both organically and through acquisitions. That was just one of many times the new CEO spoke of opportunities to focus on “a more consistent and unified user experience,” particularly in areas like its converged infrastructure data centre play.

“Just as our customers knock down their technology silos, we have the opportunity to knock down a few of our own,” he said.

One of those silos to fall appears to be the wall between personal and business computing products. Apotheker suggested that HP would find great competitive advantage from using innovations from its consumer products in its business-focused products, calling it a “secret formula” for HP’s continued success.

He also signaled that while he will keep up the legacy of cost cutting that became HP’s calling card during the Mark Hurd era, he wants to up the ante in terms of innovation, committing to spending more on research and development.

“I am particularly committed to continue our focus on operational efficiency. However, you need to invest to create sustainable operating leverage. We need to do this on a continuing basis,” he said.

One other Hurd-era plan has been sacked, likely to the delight of his new employees? Apotheker said he would reinstate salary increases for fiscal 2011, saying increases are “well deserved.”

“I believe in a performance-driven culture and our employees have been performing,” he said.

Apotheker stayed away from commenting on the company’s (and his personal) legal tilts with Oracle or its CEO Larry Ellison actively campaigning to force Apotheker to testify in Oracle’s lawsuit against his former employer SAP, other than to label it a distraction.

Proceeding over the company’s fourth-quarter results call, Apotheker was in the odd situation of reporting on a quarter he technically had nothing to do with. Although his new role was announced in late September, Apotheker only started his new gig on Nov. 1, day one of HP’s new fiscal year. But he got to deliver good news.

For the quarter, HP notched earnings of $2.54 billion (U.S.) on revenues of $33.3 billion. Both figures handily beat analyst expectations. The company’s enterprise servers, storage and networking business was a star, with servers and storage jumping 25 per cent. The PC group was up four per cent, but the commercial PCs business stood out, growing 20 per cent and seeing improved margins due to less pricing pressure and lower component costs.

The company’s printing division saw growth of eight per cent, while its services business was flat.

As a result of many of those factors, the company raised its outlook for 2011, saying it now expects to bring in between $5.16 and $5.26 per share for the year, with revenues of $132 billion to $133.5 billion.