February 24, 2012, 1:21 PM — While researching some other posts this week, I ran across interesting data involving two struggling companies -- Hewlett-Packard and Research in Motion -- that perfectly capture the problems facing each of them.
First, HP, which released its fiscal first-quarter earnings on Wednesday.
HP is involved in a lot of things -- printers, enterprise networking, technology services, software, even financial services -- but the company long has been known primarily for being the world's biggest seller of computers.
And HP's Personal Systems Group -- the one responsible for computers -- has always been the company's primary revenue driver.
That might change as early as the current quarter. In the quarter ended January 31, revenue from HP's PSG unit was $8.87 billion, down 15% from the year-ago quarter. PSG sales barely beat revenue from the services group, which increased 1% to $8.63 billion.
If HP's computer sales continue to fall -- and given the weakness in the global PC market caused in large part by the growing popularity of smartphones and tablets, there's no real reason to think they won't -- the services division should become the top revenue generator for the world's largest PC manufacturer in Q2.
That's quite a change from five years ago, when HP's fiscal first-quarter 2007 earnings showed the PSG unit generating more than twice as much revenue as services ($10.1 billion to $4.4 billion) and accounting for 35% of total quarterly revenue. In the most recent quarter, PSG accounted for 29% of HP's revenue.
Global PC sales have been declining since 2004, and margins are continuing to shrink. It's actually understandable why former HP CEO Leo Apotheker wanted to transition away from PC sales. What got him in trouble was he wanted to do it too fast, essentially lopping off a division that still was the company's top revenue generator and remains crucial to HP's sales channel.
Now for Research in Motion. This is actually kind of sad. RIM's problems have been well-documented in recent years, with its imploding share of the smartphone market routinely grabbing headlines.
But for all its woes in the U.S. and other mature markets, the Canadian company always could at least count on maintaining the top spot in its home country.
Not for much longer, it appears.