Annex Research| Annex Bulletins|
Index 2003 | Search| Feedback| Clips| Activism| Quotes|
The copyright-protected information contained in the ANNEX
BULLETINS is a component of the Comprehensive Market Service (CMS). It is
intended for the exclusive use by those who have contracted for the entire
CMS service.
Excerpts from the Confidential Client Edition
IT SERVICES
Analysis of Hewlett-Packard Services’
FY02 Business Results
From Obscurity to Stardom
In Battle for No. 3 Spot in Industry, HPS Competes with CSC, Accenture
PHOENIX,
May 13 - Whether or
not a relative newcomer to the major league of IT services -
Hewlett-Packard Services (HPS) - has already become the No. 3 in the
industry, as some of its executives claim[1],
or is on its way to a “bronze” medal, there is no doubt that HPS has
become a major global player. And
not just because of its megadeal wins this year (see “HP's
Hat Trick”, Apr 15).
HPS’ last year’s “pro forma” revenues ($12.4 billion, for the full year FY02 ended Oct 31, 2002, after the Compaq merger) would have indeed put it in the No. 3 spot, ahead of Accenture and CSC (at $11.4 billion and $11.3 billion respectively in 2002). But HPS’ actual FY02 revenues of $9.1 billion, as reported in the HP Annual Report, place it as the No. 5 in the world. For the purposes of Annex Research rankings, and apples-to-apples comparisons with other vendors, we estimated HPS’ calendar 2002 revenues to be about $10.4 billion.
[snip]
Perhaps the most redeeming feature of HPS’ success, however, has been its profitability. This relative newcomer commands the IT services industry’s best profit margin (11.2% net margin in FY02). And in the latest quarter (ended Feb 28, 2003), the HPS net margin improved slightly (to 11.5%).
[snip]
Catching
Up to IBM
Yet
only three years ago, HP was still struggling to figure out a way of
catching up to IBM, a company that already had over a 10-year head start
on HP in the IT services business. So in September of 2000, HP attempted to buy the
PriceWaterhouseCoopers Consulting (PwCC) unit for $17 billion to $18
billion. And it hired Steve
Huhn, a seasoned IBM Global Services (IGS) executive, to run the business
(see “HP to Buy PwC
Unit,” Sep 2000).
Back
then, HP had a homegrown services workforce of only 6,000 people, mostly
delivering hardware maintenance. IGS,
on the other hand, had a 160,000+ staff, encompassing
“soup-to-nuts” IT services around the globe.
Luckily for HP shareholders, the PwCC deal fell through. Two years later, IBM poached PwCC for a “mere” $3.5 billion after the latter struggled with an attempted IPO (Initial Public Offering).
[snip]
Business Segment Analysis
HPS does not break out its three business segments’ results, but we figure that hardware maintenance, or “Customer Support,” as HP calls it, is still the largest segment of its services unit’s revenue stream. We estimate that in the current fiscal year maintenance will account for about $5.2 billion, or 40% of HPS’ revenues. That makes it actually bigger than the equivalent IBM revenues that have been hovering around $5 billion in the last three years.
[snip]
Summary and Outlook
Looking
at 2003 and beyond, HPS’ hold on the third spot in the industry will be
undoubtedly challenged. CSC,
for example, is forecasting revenues of $14.3 billion to $14.7 billion for
its current fiscal year (that ends Mar 31, 2004).
Of course, HPS revenues will also grow more rapidly as a result of
its recent megadeal wins, none of which have been included sp far in its
revenue stream.
So chances are, we will have another nip and tuck contest in 2003 for the IT services “bronze.” Except that it will be between CSC and HPS, and not between CSC and Accenture, whose race to “show” we had been witnessing for years.
[snip]
"That's all she wrote," we're
afraid, for those of you who are NOT Annex
Research clients, and who are now
reading the complete Annex Bulletin (8
pages in print edition),
along with all charts which
back up our story. Qualified media
and friends of Annex
may request a TEMPORARY
User ID and Password by clicking
here and explaining why they wish to have access to this particular
Annex Bulletin. Or call Bob Djurdjevic at 602-824-8111
(cell) to
promise not to copy it or otherwise republish it. To find our how you can become one of our
clients, and read the rest of this and other Annex
Bulletins, click on
. Thank you. Happy
Bob Djurdjevic
For additional Annex Research reports, check out...
2003 HP: EXCERPTS - Analysis of Hewlett Packard Services FY02 results (May 2003); 2003 Global IT Services Heptathlon (May 23, 2003); Analysis of “Top 10” IT Leaders’ Market and Business (June 2003)
2002 IBM: “Gerstner: The Untold Story” (Dec 27), "Gerstner Spills the Beans" (Dec 13), "On a Wing and a Prayer" (Oct 21), "IBM-PwC Tie the Knot" (Oct 2), "Half or Double Trouble?" (Aug 12), Wall Street/Main Street Chasm (June 25), “Wall Street Casino,” (June 21), Big Blue Salami (June 19), "Looming IBM Layoffs" (May 14), "IBM 5-Yr Forecast: From Here to Eternity?" (Apr 2002), “Tough Times, Soft Deals,” (Apr 25, 2002), “Gerstner’s Legacy: Good Manager, Poor Entrepreneur” (Jan 2002), IBM Pension Plan Vapors: Where Did $17 Billion Go? (Mar 2002), "Sir Lou OutLayed Lay!" (Apr 1, 2002).
Or just click on 
and use appropriate
keywords.
