The San Jose Mercury-News has published an annual "Top 150" High-tech company list for the past decade; yesterday's Sunday paper carried this year's compilation. The headlined story on p.4 says "HP's bad year weighs on sector", and it goes on to note that "HP accounted for nearly half of the annual revenue for the SV150 sector" and its $12.7B loss for the year meant that the entire 35 company segment of "business information technology" made no money. The astonishing thing to me was that HP's revenue matched the other 34 companies combined, which included Cisco and Oracle, pretty large companies by most standards.
HP is still huge, in other words, second only to Apple in high-tech (did you see that IBM's revenues were five percent lower in last week's report -- and the stock market thinks they can do NO WRONG). Inexplicably, or maybe it is HP's Moonshot program, IBM's hardware revenue fell an astounding 17 percent, prompting Lenovo to hint that they are in line to buy out IBM's x86 server line.
Lessee now -- IBM sales are down five percent, hardware sales down 17 percent, and the market took their stock down four points on 190 base. Their market cap is $210B on revenues of $105B, a 200% level. HP, with sales down six percent, PC sales down eight percent (against an industry average of 14%) and enterprise hardware sales down 4%, outsold IBM by $5 Billion. Market cap = $37.8B, or 34%. IBM is worth six times as much for its falling revenue as HP? Whew! Those Autonomy losses will someday be hehind us, right?
I know, I know -- you're going to say HP has never been profitable like IBM, and it is profitability that drives stock price, not revenue. Well, not quite true historically (check out the 1987-1992 period for example at IBM vs HP), but certainly a fair comment. And PCs are a bigger dinosaur than enterprise systems for IBM, yes. And printers are going the way of all extinct species, true. So, it is grim. But I'm not fully persuaded. Apple, even at the 'collapse' of their stock price -- down from 705 in September to 395 this morning -- is valued at 220% of revenue, and their next hit won't be soon enough to save the onslaught of myriad competitors in their primary space.