By Elitsa Bakalova, Analyst
Below is TBR’s commentary on T-Systems’ 4Q13 earnings. Please feel free to use this content with TBR and analyst attributions. Contact Elitsa Bakalova at 603.929.1166 or via email at firstname.lastname@example.org for additional analysis.
T-Systems’ revenue will continue to decline in 2014; operating margin will improve but remain below competitors’ levels
With 2013 revenue down 5.2% year-to-year, T-Systems realizes growth in traditional Information and Communications Technology will remain challenging and seeks ways to improve its performance. T-Systems’ Lead in Business initiative, which emphasizes scalable, platform-based services, cloud, cybersecurity and intelligent network solutions, positions the firm for growth; however, results of the efforts will materialize after 2015. T-Systems will sacrifice revenue growth and signings in 2014 in favor of transforming its portfolio focus and increasing its profitability through restructuring and efficiency initiatives. T-Systems’ efforts to improve efficiency and contain costs resulted in improved profitability, with adjusted EBIT margin increasing to 1.6% in 2013, up from 1.1% in 2012. The firm’s profitability remains below its peer group average of 11.2% in 2013. While T-Systems expects its bottom line to improve in 2014 the 4% operating margin target by the end of 2015 will keep the firm below the peer group average.
By Jillian Mirandi, Senior Analyst
Continued portfolio expansion will drive high 25% to 30% growth for Salesforce.com in CY14
Salesforce.com is constantly evolving its market messaging — from a cloud CRM company, to the social enterprise, to a customer company — and we foresee Salesforce.com morphing into an enterprise platform company in 2014. In recent years, Salesforce.com evolved its messaging and invested billions in expanding its portfolio beyond CRM, with marketing automation the most recent focus. We estimate Marketing Cloud generates 12% of the company’s revenue, and its revenue contribution will increase over CY14 as it is sold both independently and into Salesforce.com’s customer base. Continue reading
By Matthew Casey, Analyst
IBM’s cloud investments complement existing software capabilities and enable future growth in cloud
As cloud transformation accelerates in the IT landscape, vendors such as IBM, SAP, Oracle and Microsoft face the challenges of transitioning existing portfolios and providing a clear migration path to proprietary cloud solutions to minimize customer attrition. For IBM in particular, the modernization of existing capabilities focuses on leveraging cloud as a foundation for delivery and execution of corporate initiatives across software and services such as MobileFirst and analytics. IBM’s two announcements Monday, committing an additional $1 billion in cloud software investments and acquiring cloud database provider Cloudant, represent the company’s approach to evolving technical capabilities through specialized acquisitions and then scaling these capabilities through existing software offerings and services. Representing the migration path between IBM’s legacy software portfolio and the cloud infrastructure acquired through SoftLayer, acquisitions such as Cloudant and the new BlueMix platform will help IBM continue monetizing its existing software capabilities while positioning the company for future growth in cloud and ultimately an outcomes-based business model. Continue reading
By Scott Dennehy, Engagement Manager/Senior Analyst
Below is TBR’s commentary on HP’s calendar 4Q13/fiscal 1Q14 results, highlighting key developments in HP’s Communications and Networking segments. Please feel free to use this content with TBR and analyst attributions. Contact Scott Dennehy at (603) 929-1166 or email@example.com for additional commentary.
Developing its capabilities in network function virtualization (NFV) will be a key component of HP’s growth strategy in the communications vertical
A combination of weak customer spending and HP’s emphasis on profitability continues to negatively impact HP’s communications services revenue, which TBR estimates declined 4.6% year-to-year in 4Q13 and 6.3% year-to-year for the full-year 2013. HP’s focus on high-margin, application-focused C&SI limits the company’s services revenue opportunities with telecom providers and will further impact revenue growth for the foreseeable future.
By Jack Narcotta, Analyst
Below is TBR’s commentary on HP’s calendar 4Q13 earnings with a focus on PCs, servers and storage. Please feel free to use this content with TBR and analyst attributions. Contact Jack Narcotta at (603) 929-1166 or firstname.lastname@example.org for additional commentary.
Shifting its focus to the enterprise will help HP take larger steps on its path to a turnaround
While its core PC and data center hardware business remain under attack from mobile devices, and Lenovo is emerging as a multiple-segment threat, HP’s 4Q13 performance shows encouraging signs that the company’s evolving product portfolio and its solutions-based messaging are beginning to take hold in its important enterprise customer base and in the global IT market.
By Jillian Mirandi, Analyst and Matthew Casey
Below is TBR’s commentary on HP Software’s 4Q13 earnings. Please feel free to use this content with TBR and analyst attributions. Contact Matthew Casey or Jillian Mirandi at (603) 929-1166 or via email at email@example.com or firstname.lastname@example.org for additional analysis.
HP Software continues declining due to a changing software landscape
HP Software’s bread-and-butter, ITSM, is moving to a services-led model, evidenced by the declines of CA and BMC and the success of ServiceNow and cloud-focused SIs. HP Software’s sales model still revolves around large, point products and selling directly to IT departments, while the model shifts more heavily to “as a Service” and platform-based, with purchasers across IT and LOB. TBR believes a successful ITSM model will entail a platform-grounded, services-led solution. HP Software initiated this transition with June’s launch of HAVEn and improving channel support. HP Software’s fifth consecutive quarter of flat of negative revenue change, at 1.1% year-to-year decrease, was 4Q13. We expect this trend to continue across 2014 as portfolio and operational investments will be slow to drive a turnaround. HP’s sales teams have not broken old habits of leveraging software to sweeten hardware deals on the cheap. HP Software is not alone in sales operations issues, as traditional habits are also hindering growth among competitors CA Technologies and BMC. To help offset direct sales issues, HP Software, CA and BMC are increasing channel investments and reliance to help turnaround growth in the long run.
By Cassandra Mooshian, Analyst
Below is TBR’s commentary on HP Services’ 4Q13 earnings. Please feel free to use the below content, or call/email Cassandra Mooshian (603.758.1827 / email@example.com) for additional commentary.
HP Services’ financial performance remained under pressure from account runoffs, restructuring and service delivery inefficiencies in 4Q13
HP reported $7.7 billion in Services revenue in 4Q13 (fiscal 1Q14), down 6.4% from the year-ago quarter and 4.7% sequentially. Technology Services (TS) revenue declined 3.8% from 4Q12 to $2.1 billion, which TBR attributes to weakened product sales in prior quarters decreasing the attach rate of technology support and maintenance services. The unit, however, is taking strides to rely less on hardware sales to drive TS revenue by developing services that better address market demand for more complete IT solutions, particularly around cloud, analytics and mobility. IT Outsourcing (ITO) and Applications and Business Services revenues declined 9.2% and 3.8% year-to-year, respectively, in 4Q13 as customers migrated to cloud infrastructures, pilfering away traditional outsourcing revenues, and account runoffs drove revenue and profitability pressures. Signings in HP’s Strategic Enterprise Services segment, which includes cloud, mobility and analytics, were reportedly up significantly from the year-ago quarter while TS’ Proactive Care orders grew by triple digits over the same compare.