HP chief sees tech giant's future in the clouds

By Cliff Edwards, Aaron Ricadela

Hewlett-Packard chief executive Leo Apotheker plans a deeper push into software and the expanding market for computing delivered via the internet.

The company is starting a cloud-computing service that will let developers create applications for consumers and businesses using HP tools and that run on HP servers, Apotheker said at an event in San Francisco this week.

HP also plans to put its WebOS mobile software on to a broader range of products, ramping up output to more than 100 million devices a year. And the company announced a 50 per cent increase in its dividend.

"Everything that we do in the future will be delivered as a service," Apotheker said. "It's the first time HP is trying to put all of the elements of what it's doing together."

Apotheker aims to get more HP products working in tandem, and expand in software markets dominated by rivals IBM and Oracle. The approach may make its machines more attractive to corporate customers, said Tim Bajarin, an analyst at consulting firm Creative Strategies.

Still, the chief executive must guard against overspending on the cloud, which requires much computing power to deliver software broadly, said San Francisco analyst Jayson Noland.

"To really take that market on, you need to make a big capex investment."

Noland has an "outperform" rating on the shares.

From a competitive perspective, HP should be able to trade on its respected brand name, Noland said. Apotheker is breaking from his predecessor Mark Hurd by concentrating on revenue growth instead of cost-cutting.

Hewlett-Packard shares have declined 12 per cent since Hurd resigned in August, and sales growth will be slower this year and next, compared with the average 8 per cent growth under Hurd.

In a move that may assuage disgruntled investors, HP raised its quarterly dividend for the first time in 13 years, increasing it to US12c a share from US8c. Chief financial officer Cathie Lesjak said the company would remain an "active acquirer" and focus software growth on cloud products.

HP will both build and acquire the software it needs to help companies write and run applications via Hewlett-Packard's cloud service, Apotheker said. The company will take a "disciplined" approach to takeovers, he said.

The company will offer applications for corporations and consumers via an online store.

"Any developer can deliver his or her innovation to either the consumer, the enterprise or the small and midsize business," Apotheker said. "HP has the ambition of being in all layers of the cloud."

Hewlett-Packard may let other companies distribute their software through its cloud service, Apotheker said. He singled out applications providers, "some of whom are in Germany".

Apotheker plans to make better use of the WebOS software that HP gained in last year's US$1.2 billion purchase of smartphone maker Palm, installing it on every PC shipped by HP next year. The PCs will also be able to run Microsoft's Windows.

The company has an advantage when it comes to the corporate market, said Creative Strategies' Bajarin.

"That 100 million devices number is the most important thing I heard," Bajarin said.

"It could be a big play for HP" in terms of enterprise customers, he said. "No one else is driving that route."

HP also said it would begin shipping a new computer tailored for data analysis soon after it closes the acquisition of software company Vertica in the second quarter, which ends in April.

Its ability to sell to consumers and businesses alike will serve it well, since computer users increasingly rely on the same devices for both personal and business-related tasks, said analyst Joshua Greenbaum.

"This convergence of the consumer and the enterprise is a huge issue, and one that HP can really leverage," Greenbaum said. "All software is moving to the cloud."

- Bloomberg

Services and applications used over the internet instead of on hardware and software that you buy and install.

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