Wednesday, May 17, 2006

HP = Hot Procurement

HP (NYSE HPQ) announced quarterly earnings were up 51% yesterday. Why? After all, year over year revenue was only up 5.5%.

How about margin increases in nearly every business group.

Personal Systems Group (computers and stuff), profit as a percentage of revenue increases from 2.3% to 3.6%, good for an additional $90 million in profit.

Imaging and Printer Group, profit as a percentage of revenue increases from 12.7% to 15.5%, good for a cool $180 million in a segment that earned $1.0 billion for the company.

Enterprise Storage and Servers, profit as a percentage of revenue increases from 4.3% to 7.5%, another $137 million.

Out of a $500 million increase in profitability, that's $407 million that wouldn't be there if margins were the same as last year.

Where does increased margin come from? One place it comes from is selling lots of printer cartridges, but another place it comes from for this Ariba, Inc. customer is Spend Management. (See Jason Busch's recap of HP VP Larry Welch's keynote at AribaLive on Spend Matters.)

Mark Hurd gets a lot of pub for being a sales data jockey, he even discussed plans to hire hundreds of salespeople in the next several months. You can make the case that he's able to pay for it because of world class spend management.

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