Hewlett-Packard lifts local returns

Competition and lower prices flowing from a weak United States dollar has hit computer giant Hewlett-Packard's New Zealand revenue but not its profits.

Figures filed with the Companies Office show that in the last October 31 year Hewlett-Packard New Zealand's revenue dropped 6.7 per cent from $539 million to $503 million, but its after-tax profit jumped from $2.5 million to $7.8 million.

It remains New Zealand's largest IT company, ahead of IBM, which had operating revenue of $354 million in 2003.

HP communications manager Kirsten Blanchard said the company would not comment on financial performance in individual countries.

"We are pleased with our performance for FY04, particularly given the reduction in the average sales price of many of our products as a result of the strong New Zealand dollar," Blanchard said.

The New Zealand manager of analyst firm International Data, Graeme Muller, said the weak US dollar drove down prices across the PC and server market. But he said HP's profitability improved because of a changing product mix.

"HP has experienced declining market share in the PC market, from 33 per cent in 2003 to 29 per cent in 2004," Muller said.

"However, the competition in the desktop PC market has made it less and less profitable and it is fast becoming a true commodity product."

HP's market share in notebook computers dropped two points to 29 per cent, but it boosted its share of x86 server sales from 43 per cent to 50 per cent.

In 2003, HP's product mix by value in the PC group was 54 per cent desktops, 27 per cent notebooks and 18 per cent x86 servers. At the end of last year, desktops, which have considerably lower margins, had dropped to 45 per cent with proportionate growth in their notebook and x86 server sales.

Muller said while HP's share of the printer market dropped from 35 per cent to 28 per cent, it gained ground in the higher-priced, higher-margin end of the market.

Its share of total colour page printer sales jumped from 24 per cent in the third quarter to 40 per cent in the fourth quarter.

It maintained its lead in the storage market with a dominating 43 per cent share.

Muller said in 2003 about 20 per cent of HP's revenue came from its services business.

"This may have improved slightly in 2004 as, according to HP's accounts, it has improved its gross profit ratio significantly from 0.83 in 2003 to 2.4 in 2004.

"This can occur as a business increases the level of service offered over products," he said.

Some $25 million was shaved off cost of sales, with the lower cost of product in New Zealand dollars, while salaries and employment costs came down $600,000 to $52.1 million.

HP's varied fortunes

* New Zealand's largest IT company, Hewlett-Packard, saw profit jump more than 300 per cent in the year to the end of October 2004.

* HP's share of the desktop and notebook PC markets has slipped but it has gained ground in the more profitable server market.

* The company's overall printer market lead has also declined but it has improved sales in the high-margin colour market.

* HP continues to dominate the data storage market.