Fighting on two fronts

More change is on the cards at Hewlett Packard Financial
Services as it seeks to increase efficiencies, while driving
sales
 
 
 

Hewlett Packard Financial Services bosses were celebrating last
month. Not only did revenue for the financial year in 2007 total an
impressive $2.3bn, it also achieved record figures of $657m for a
single quarter during the three months to October 31. This
represents 21 per cent year-on-year growth – and ends a fairly flat
two-year period, when revenues barely exceeded the $550m mark per
quarter.

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However, despite 15 per cent growth in the size of its
portfolio, to $8.3bn, operating profit – while the highest it has
been in two years, at $48m – is marginally down on what it was in
Q4 2005.

The leasing business as a whole represents 2 per cent of overall
revenues for the parent company, which is precisely the figure this
time two years ago. This lack of change was reflected in comments
made last month by Mark Hurd, Hewlett Packard’s chairman and
president.

“We’re actually trying to get more exposed to [Hewlett Packard] Financial Services by selling more into that industry,” he said.
“We see it as a big opportunity for us, but, currently, it’s not
nearly as big as we would like – but [we] saw no material weakness
in it during this quarter.”

Hewlett Packard, however, made it clear, in August of this year,
that – while it wants its captive finance arm “to expand our share
of the wallet” – it will “need to take necessary actions, which
include incremental workforce reductions, to lower our cost
structure”.

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Restructuring

Already it has started this process. These results followed a
major restructuring of its Europe, Middle East and Africa (EMEA)
business in April 2006, which saw many of its operations
centralised into its HP International Bank in Dublin.

This bank was set up nine years ago, largely because HP
considered it was easier for a bank, rather than a regular
financial services outfit, to get a credit license and sell
pan-European operating and finance leases.

Hewlett Packard FS’s customer support functions – including
accounting, legal, tax, financial, credit and risk – are all now
based out of Ireland, a country chosen for its favourable
regulatory regime and because HP already had 4,500 staff based
there.

Paul Sheeran, HP FS’s head of EMEA, says by taking these staff
resources away from the regions it has made cost savings. Exactly
how much, he would not disclose. He also would not comment on what
deals it uses automation, although he points out, since the
reorganisation, systems have been upgraded. Either way, a
restructuring was needed – Sheeran admits “EMEA was particularly
dispersed”, while America was “centralised”.  

Following the completion of the restructuring, one priority for
the business has been to build up its sales force, which operates
on a frontline basis and alongside HP colleagues.

Like most lessors in the IT sector, Sheeran’s business is intent
on driving up the end-to- end service it provides to clients. This
means providing equipment maintenance and new kit during a lease,
over and above the financing. Its customers also increasingly make
use of its pay-per-use offering and the business is kept busy in
its efforts to match a financing service with the multitude of new
products launched by HP. Sheeran says, while “we are closely
integrated to make sure we know where the customer is going, we
cannot have perfect integration”.

Exactly how much of HP’s products are financed is unknown – the
official figure is that, globally, 65 per cent of the parent
company’s major clients are leased assets by HP Financial Services.
However, the extent to which it finances HP’s products, at least in
EMEA, is expected to grow over time – particularly as it builds its
business in central and Eastern Europe, and if growth continues to
occur at the fast rate it currently does in Scandinavia and
Germany.   

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