Business News from Tech Giants

Hewlett-Packard Co. (HP) announced the effective resignation of its Chairman, President and CEO Mark Hurd, as well as preannounced strong third-quarter earnings. In other news, Citrix Systems, Inc. and Teradata Corp. posted strong quarters, and according to sources familiar with the situation, Oracle Corp. has laid off employees within the Sun high performance computing (HPC) group.

Focal Points:

• HP announced that Chairman, President and CEO Mark Hurd resigned, effective immediately, surrounding the investigation of a sexual harassment claim connected to a contractor. The company has appointed Cathie Lesjak, a 24-year veteran of HP who has served as CFO and as a member of the company’s Executive Council since January 2007, as interim CEO. The board will search for a permanent replacement, considering both inside and outside candidates.  According to HP, Hurd tried to hide expense reports, which were not material to the company and that would have revealed his relationship with the contractor. HP added that Hurd’s resignation and the investigation have "nothing to do with the operational performance of the company." For the third quarter, HP preannounced earnings of 75 cents per share on revenue of $30.7 billion, an 11-percent increase over last year. For the fourth quarter, HP has projected revenue of $32.5 billion to $32.7 billion and earnings per share of $1.03 to $1.05. Additionally, HP announced that it expects to see revenue of $125.3 billion to $125.5 billion with earnings per share of $3.62 to $3.64 for the fiscal year.
• Citrix posted strong results for the second quarter 2010, reporting $458.4 million in revenue, or a 17-percent increase over the same quarter last year. Additionally, the company announced a net income of $47.6 million, up 12 percent year-over-year. Sales for the quarter from new product licenses rose 15 percent over last year to $148.7 million, while sales from software license updates increased 13 percent to $169.6 million, said Citrix. Meanwhile, revenue from online services and software-as-a-service (SaaS) software came to $89.2 million, up 18 percent compared to the second quarter 2009, and revenue from technical services rose 35 percent to $51.9 million, Citrix added.
• Teradata announced that it booked the best second quarter in its history. Revenues rose 12 percent to $470 million, and net income rose 19 percent to $74 million. This is despite increased costs from R&D and from expanding Teradata's sales force into 19 new territories, according to the company. Revenue from data warehousing hardware and software grew 21 percent year-over-year to $223 million, while revenue from consulting services rose four percent to $132 million. Maintenance services for the quarter accounted for $115 million, rising six per cent over the year-ago quarter, Teradata added.  On a geographical basis, sales in the Americas were up 23 percent year-over-year to $281 million, while sales in the Asia-Pacific region rose nine percent to $81 million. Sales in the EMEA region, however, fell eight percent to $108 million, the company said. In other news, sources familiar with the matter claim that Oracle conducted layoffs the other week. Most of the HPC sales force was let go, and the remainder were redeployed to sell Oracle's Exadata V2 data warehousing and online transaction-processing clusters, the source stated.

Experton Group believes the change at the top of HP will not impact revenues in the near-term but a new top executive could change Hurd's acquisition and R & D strategy, which could impact long-term prospects. HP's turnaround under Mark Hurd also included restructuring and cost cutting. The Board has not given any indication of whether it will promote from the inside or hire from the outside. If it goes outside again, there may be loss of key senior executives as well. However, all these machinations should not impact HP's ability to meet customer needs in the near- to intermediate-term. Citrix continues to remain a strong contender in the market and now garners an impressive 20 percent of its revenues from its SaaS offerings. Teradata has demonstrated that it can hold its own and grow even though it is in a very competitive market. The company is responding to changing customer demands and competition quite effectively. Meanwhile, Oracle's strategy for Sun products remains unclear. IT executives working with the above-mentioned vendors – except for Oracle – should stick with their existing strategies and plans. On the other hand, IT executives looking at Sun products should insist Oracle disclose its Sun strategies and roadmaps before making any commitments with long-term implications.