The main engine of their business is enterprise that was run by Dave Donatelli.  Overall Enterprise Group revenue declined 9 percent year over year. Networking revenue was flat, Industry Standard Servers revenue was down 11 percent, Business Critical Systems revenue was down 26 percent, Storage revenue was down 10 percent and Technology Services revenue was down 7 percent.

The only bright spot was the Software Group run by George Kadifa.  Software revenue was up 1 percent year over year.

Executive Management Changes

HP continues to execute their multi-year turnaround and CEO Meg Whitman will continue to focus on execution of their business.  As part of the turnaround Meg has made some big executive changes to bring new focus and priorities.

In a separate organizational move, HP will combine its Marketing and Communications organizations under the leadership of Chief Communications Officer Henry Gomez.

All of the changes are effective immediately.

Analysis

The earnings and executive changes  by HP continue to highlight what we’ve been saying here at SiliconANGLE for years – the transition to a modern era of cloud, mobile, and Big Data will require a modern view of the future of computing and software.  Moreover, large companies such as HP and IBM are under pressure from cloud and new economics that are directly impacting their core businesses – servers, storage, and services.  HP’s performance is clear validation that cloud is impacting the large blue chip suppliers to large enterprises.

HP must shrink to grow.  HP simply got too big buying assets at the tail end of their life cycle and not replenishing with replacement growth engines either organic or inorganic.  We expect HP to start making more acquisitions in the near term.

HP’s challenge has always been it’s assets and it’s ability to leverage it’s supply chain.  It is clear that the company is willing to cannibalize it’s own business to position it for growth.  That is why we are seeing a huge shift in people, products, and investments to cloud, software, new Moonshot servers and Big Data.

Growth Investment – Customers

In order for HP to replenish their growth engine they need products customers want.   The challenge for HP, as highlighted by their recent successes in the product market combined with their lack of financial performance, is that what the customers want is not the best margin and revenue products for the old HP product strategies.  The new products that customers want are cloud, Big Data, HP’s Moonshot servers, and modern agile-based software.  This is why HP is moving fast.  This is not just an HP problem but all legacy enterprise suppliers including IBM.

I consider HP on the right track in “eating their own” before the competition “eats them”.  HP is focused on new cloud enterprise technologies which include a buffet of integrated software and services for the modern enterprise.

HP’s transition is playing out and they have to “break through” with new products customers that want at margins that can support their revenue targets.   So far HP has been moving in this direction.  Again this is why we believe that the earnings and management changes are taking place.

Dave Vellante and I were talking on @theCUBE recently that we see a swing back to hardware based open source platforms in the next 24 months.  As this happens HP will be poised to ride the cloud infrastructure growth with enterprise centric offerings while reseting expectations on margins and profitability.

We’ll continue to document the HP turnaround.