T-Systems ended another year of revenue decline and thin profitability, despite success in cloud, which grew 40% year-to-year in 2014

By Elitsa Bakalova, Analyst

Despite T-Systems’ transition from traditional IT services to scalable solutions provider, TBR expects revenue growth to remain pressured in 2015

T-Systems’ total revenue declined 7.1% year-to-year in 4Q14 and declined 4.8% year-to-year in 2014, and TBR expects the downward revenue trend to remain in 2015. Sustained price pressures due to competitively priced offerings from India-based IT service providers, multinational and European vendors and T-Systems’ withdrawal from unprofitable business as part of its ongoing restructuring will hamper T-Systems’ growth in 2015. With an operating margin (EBIT margin) of 1.5% of revenue in 2014 and its transformation activities, TBR expects T-Systems’ 2015 profitability to remain below the peer average, which was 12.8% in 4Q14. Continue reading

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Workday invests for growth, expanding its global presence, services partner ecosystem and portfolio breadth

By Jillian Mirandi, Senior Analyst, and Kelsey Mason, Analyst

Emphasis on prioritizing customers sets Workday apart from traditional competitors

Broad-based growth remains Workday’s primary objective as the company competes for a greater share of the large enterprise space against traditional vendors such as Oracle and SAP. Workday sustains revenue growth in the high double digits, 60% year-to-year in 4Q14, by expanding its portfolio horizontally and vertically, through add-ons such as Insight Applications and industry-tailoring of core products such as Financial Management. In 2015 Workday will expand its presence globally as enterprises increasingly look to migrate from legacy on-premises applications to the cloud. Workday will build out its services partner ecosystem and internal sales team, illustrated by the addition of Phil Wilmington as worldwide head of sales, to execute these expansion efforts. Continue reading

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Large deals, a diversified portfolio and industry customization drove Salesforce to $5.37B in 2014

By Jillian Mirandi, Senior Analyst

Investment in elevating its relationships with customers to a more strategic level pays off for Salesforce, driving a growing number of large deals

Over the past year, Salesforce has been taking steps such as industry-customization and improving its relationship with consulting partners, to move into a more strategic advisory role across its large enterprise customer base. TBR believes these efforts have proven successful given that Salesforce is closing a greater number of enterprise deals at increasing value. Continue reading

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HP Services positions for future Services revenue growth by organizing around emerging technologies

By Cassandra Mooshian, Analyst, and Kevin Collupy, Research Analyst

Revenue contraction continues for HP Services and will remain throughout 2015

HP reported $6.98 billion in Services revenue in 4Q14 (fiscal 1Q15), down 9.3% from the year-ago quarter and a decrease of 8.2% sequentially. Technology Services (TS) revenue declined 5.4% from 4Q13 to just under $2 billion; despite weak revenues, profitability within TS remains strong and consistent driven by improving renewals. HP is executing on improving efficiency across the organization while driving order growth with newer portfolio offerings such as proactive care and data center care. Continue reading

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HP is betting on emerging segments such as NFV and ‘brite box’ switching to drive growth in Communications and Networking

by Scott Dennehy, Engagement Manager and Senior Analyst

HP will invest in its OpenNFV program as network functions virtualization becomes the architecture of choice for service providers

HP’s Communications Services revenue continues to be impacted negatively by the company’s emphasis on high-margin, application-focused consulting and systems integration, as this strategy limits revenue opportunities with telecom service providers. Revenue in the segment decreased an estimated 5.9% year-to-year in 4Q14, the eleventh straight quarter of year-to-year decline.

However, service providers will continue to navigate through consolidation, national economic issues and regulatory uncertainties, while competition compresses margins. Most service providers are awakening to the need to transform their business models and are accelerating initiatives to do so, a process that will create opportunities for suppliers such as HP to deliver new technologies. Continue reading

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License revenue erosion will pressure HP’s evolving SaaS portfolio to deliver growth in 2015

By Andrew Smith, Analyst

In 4Q14 HP Software revenue declined 5% from the year-ago quarter to $871 million. Software’s decline mirrored a corporate year-to-year decline of 5% to $26.8 billion. HP continues to face financial headwinds associated with restructuring payments as well as difficult macroeconomic conditions, particularly in EMEA where geopolitical instabilities contributed to 5% revenue decline from the year-ago quarter. Despite these difficulties, HP Software was able to improve operating margin 2.2% year-to-year to 18%. Maintaining profitability will be essential for HP as it continues to navigate the transition to SaaS-based sales and deployment models for its software solutions. The vendor will continue to manage costs through headcount reductions, announcing a workforce reduction of 2,800 during 4Q14. Despite headcount management measures, TBR believes HP will be challenged to maintain profitability while also investing in the R&D and sales capabilities necessary to execute its SaaS-oriented product and marketing shifts. Continue reading

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HP’s financial performance is challenged by its slow evolution to a software- and services-led business model

By Stephen Belanger, Analyst

As HP prepares to split, the company’s revenue declined year-to-year for the second straight quarter

HP’s corporate revenue declined a reported 4.7% year-to-year to $26.8 billion in 4Q14, caused by primarily by declines from the Imaging and Printing Systems and Services business units. HP’s 4Q14 results exhibit the vendor’s core competency as a hardware vendor, as Personal Systems Group (PSG) and Enterprise Servers, Storage and Networking (ESSN) revenue increased slightly year-to-year. However, HP’s struggles to develop deeper engagements with customers beyond servers and PCs were demonstrated by the vendor’s 10.8% year-to-year services revenue decline. TBR believes HP’s short-term results will remain pressured in 2015 as the company prepares to split into two entities. Continue reading

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