Hewlett-Packard Co
HPQQ2 2013 Earnings Call Transcript
Now let me turn to where performance needs to improve. While HP's new converged infrastructure products give me confidence in the long-term, we have to do a better job managing the transition from the technologies that powered the past, the one's that will power the future, that's particularly true in personal systems, industry standard servers and traditional storage. These are highly competitive markets with aggressive competitors fighting for share and we need to fight much harder. For me this all comes down to our will to win and we are committed to winning.
In industry-standard servers we underperformed in both the Hyperscale and Mainstream served market. Our underperformance was driven by both market conditions and our own execution. In Hyperscale where we expect Moonshot will give us a differentiated offering the transition is going to take time. In the meantime, we have to closely manage the balance between margin and share. In the second quarter, we saw single-digit revenue decline as competitors aggressively priced in the market but that cannot be an excuse. We simply have to execute better and we are on it. We are moving quickly to revamp business models to give our sales teams and channel partners more tools and more agility, especially on pricing. Given the deal cycle times in this business, we won't see the results of these activities until later in the year. In the mainstream business, while we need to improve our operational execution we again encountered very aggressive, competitive pricing and a weak macroeconomic environment. We stepped away from a number of deals to protect our bottom line and it is clear that we need to take another look at the low-end of our product line to better match customer needs and price points. Again this all comes down to execution.
In Personal Systems, against the backdrop of dramatic overall PC market contraction we saw revenue declined 20% over the prior year. These results were exacerbated by difficult compared to Q2 of 2012, when we saw an increase in volume as the hard disk drive industry came back online following the Thailand flood. If you were to normalize the market share results for this by comparing the first half of 2013 to the first half of the prior year HP would have held share and gained share in commercial and desktop segments. As I said before we are focused on improving our execution and driving profitable growth in our Personal Systems business we saw margins of 3.2% in the quarter, which was up 0.5 points sequentially, but down 2.2 points over the prior year. It will take time to get our margins where we want them to be against the backdrop of a changing marketplace.
Let me say a bit more about our strategy in this business, using multiple operating systems, multiple architectures and multiple form factors, we are moving quickly to produce the devices that customers want, and in this battle for customers, our supply chain and distribution network gives us a key advantage. You will also see us focus on services, peripherals and accessories to increase the revenue potential of our devices.
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