Welcome!

IBM Cloud Authors: Elizabeth White, William Schmarzo, Don MacVittie, Pat Romanski, Liz McMillan

News Feed Item

Fitch Rates Hewlett-Packard's Senior Unsecured Note Offering 'A-'; Outlook Stable

Fitch Ratings has assigned an 'A-' rating to Hewlett-Packard Company's (HP) proposed offering of senior unsecured notes. Net proceeds from the offering will be used for general corporate purposes. The Rating Outlook is Stable.

KEY RATING DRIVERS

The ratings and Stable Outlook reflect HP's:

--Strong core credit metrics, with core (non-financing) leverage (core debt/ core operating EBITDA) of 0.9x as of Oct. 31, 2013 compared with 1.1x in the prior year as significant debt reduction more than offset revenue and profitability pressures. Core interest coverage (core EBITDA/ core interest expense) remains solid at 31x compared with 27x in the year ago period.

Fitch forecasts core leverage will remain below 1x through fiscal 2016 reflecting revenue stabilization, modest EBITDA margin expansion due to restructuring activities and positive revenue mix, and marginal incremental debt reduction.

--Strong liquidity and free cash flow (FCF), consisting of $12.2 billion of cash (primarily offshore), $7.5 billion of undrawn committed credit facility capacity and annual FCF (post dividends) typically in excess of $5 billion.

--Significant scale and broad portfolio, which provides purchasing leverage for shared components and strengthens the resiliency of its total revenue.

--Strong worldwide market share, including leading unit market share in servers and printers and second largest share in PCs, IT services and networking.

--Significant recurring revenue (33% of total revenue) primarily via printer supplies, outsourcing and technology services, and software maintenance.

--Geographically diversified revenue base with approximately 66% of revenue derived from outside the U.S.

Rating concerns include:

--Operating margin compression in HP's Enterprise Group due to pricing pressures and adverse revenue mix in industry standard servers (ISS), and declines in traditional storage products (tape and EVA SAN), partially offset by new converged storage products (3PAR StoreServ, StoreOnce and StoreAll).

--Continued secular decline in high margin business critical systems (BCS) revenue, which declined 26% in the latest 12 months (LTM) ended Oct. 31, 2013. HP's technology services revenue and operating margin is also adversely affected as customers gradually migrate to UNIX servers offered by competitors (IBM and Oracle) or x86 servers that have lower attach rates and less profitable support contracts.

--Potential long-term hardware revenue and profitability pressures if commercial customers aggressively adopt cloud computing and the market for cloud services is highly concentrated. In this scenario, cloud providers would have significant pricing leverage due to scale and/or could accelerate their utilization of unbranded custom-built servers.

--Aggressive pricing and weak global demand for PCs due to cyclical factors affecting the commercial PC business and secular factors in terms of tablet or smartphone substitution adversely affecting consumer PC demand. This risk is muted by the low profit contribution of HP's PC business, which Fitch estimates at 8%-9% of total segment operating profit, despite accounting for 28% of total revenue.

RATING SENSITIVITIES

The ratings may be upgraded in the event of:

--Strong revenue growth and expanding margins for the Enterprise Group, which provides greater diversity to the company's operating income mix. Printing accounted for 36% of total segment operating profit in the LTM ended Oct. 31, 2013 compared with approximately 28% in the prior three years.

--Material revenue shift towards software provides margin expansion and greater recurring revenue through subscriptions or maintenance.

The ratings may be downgraded in the event of:

--Continued long-term market share losses in industry standard servers, indicating lackluster demand for HP's new Moonshot servers.

--Significant decline in supplies demand, particularly commercial, which is not offset by growth in other HP segments.

--The company divests any businesses that results in material dis-synergies or EBITDA deterioration.

In addition to its solid cash position and consistent FCF, HP's liquidity is further supported by two undrawn revolving credit facilities, which had aggregate capacity of $7.5 billion as of Oct. 31, 2013, and multiple revolving trade receivables facilities with $838 million of available capacity as of July 31, 2013 (latest date available). HP's revolving credit facilities consist of a $4.5 billion credit facility expiring in February 2015 and a $3 billion facility expiring in May 2017. Minimum interest coverage of 3x is the sole financial covenant.

Total debt was $22.6 billion as of Oct. 31, 2013, consisting of short-term debt of nearly $6 billion, primarily current portion of long-term debt, and long-term debt of $16.6 billion. Fitch estimates approximately $10.9 billion, or 48% of total debt, is attributable to HP's customer-financing business.

Fitch currently rates HP and its wholly owned subsidiaries as follows:

HP

--Long-term Issuer Default Rating (IDR) at 'A-';

--Short-term IDR at 'F2';

--Senior credit facilities at 'A-';

--Senior unsecured debt at 'A-';

--Commercial paper (CP) at 'F2'.

Hewlett-Packard International Bank PLC

--Short-term IDR at 'F2';

--CP 'at F2'.

Electronic Data Systems LLC

--Long-term IDR at 'A-';

--Senior unsecured debt at 'A-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813933

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
DX World EXPO, LLC, a Lighthouse Point, Florida-based startup trade show producer and the creator of "DXWorldEXPO® - Digital Transformation Conference & Expo" has announced its executive management team. The team is headed by Levent Selamoglu, who has been named CEO. "Now is the time for a truly global DX event, to bring together the leading minds from the technology world in a conversation about Digital Transformation," he said in making the announcement.
"Space Monkey by Vivent Smart Home is a product that is a distributed cloud-based edge storage network. Vivent Smart Home, our parent company, is a smart home provider that places a lot of hard drives across homes in North America," explained JT Olds, Director of Engineering, and Brandon Crowfeather, Product Manager, at Vivint Smart Home, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that Conference Guru has been named “Media Sponsor” of the 22nd International Cloud Expo, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. A valuable conference experience generates new contacts, sales leads, potential strategic partners and potential investors; helps gather competitive intelligence and even provides inspiration for new products and services. Conference Guru works with conference organizers to pass great deals to gre...
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform. In his session at @ThingsExpo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and shared the must-have mindsets for removing complexity from the develop...
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
"Evatronix provides design services to companies that need to integrate the IoT technology in their products but they don't necessarily have the expertise, knowledge and design team to do so," explained Adam Morawiec, VP of Business Development at Evatronix, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
Widespread fragmentation is stalling the growth of the IIoT and making it difficult for partners to work together. The number of software platforms, apps, hardware and connectivity standards is creating paralysis among businesses that are afraid of being locked into a solution. EdgeX Foundry is unifying the community around a common IoT edge framework and an ecosystem of interoperable components.
Large industrial manufacturing organizations are adopting the agile principles of cloud software companies. The industrial manufacturing development process has not scaled over time. Now that design CAD teams are geographically distributed, centralizing their work is key. With large multi-gigabyte projects, outdated tools have stifled industrial team agility, time-to-market milestones, and impacted P&L stakeholders.
"Akvelon is a software development company and we also provide consultancy services to folks who are looking to scale or accelerate their engineering roadmaps," explained Jeremiah Mothersell, Marketing Manager at Akvelon, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"IBM is really all in on blockchain. We take a look at sort of the history of blockchain ledger technologies. It started out with bitcoin, Ethereum, and IBM evaluated these particular blockchain technologies and found they were anonymous and permissionless and that many companies were looking for permissioned blockchain," stated René Bostic, Technical VP of the IBM Cloud Unit in North America, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventi...
In his session at 21st Cloud Expo, Carl J. Levine, Senior Technical Evangelist for NS1, will objectively discuss how DNS is used to solve Digital Transformation challenges in large SaaS applications, CDNs, AdTech platforms, and other demanding use cases. Carl J. Levine is the Senior Technical Evangelist for NS1. A veteran of the Internet Infrastructure space, he has over a decade of experience with startups, networking protocols and Internet infrastructure, combined with the unique ability to it...
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud ...
"Cloud Academy is an enterprise training platform for the cloud, specifically public clouds. We offer guided learning experiences on AWS, Azure, Google Cloud and all the surrounding methodologies and technologies that you need to know and your teams need to know in order to leverage the full benefits of the cloud," explained Alex Brower, VP of Marketing at Cloud Academy, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clar...
Gemini is Yahoo’s native and search advertising platform. To ensure the quality of a complex distributed system that spans multiple products and components and across various desktop websites and mobile app and web experiences – both Yahoo owned and operated and third-party syndication (supply), with complex interaction with more than a billion users and numerous advertisers globally (demand) – it becomes imperative to automate a set of end-to-end tests 24x7 to detect bugs and regression. In th...
"MobiDev is a software development company and we do complex, custom software development for everybody from entrepreneurs to large enterprises," explained Alan Winters, U.S. Head of Business Development at MobiDev, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, discussed how from store operations and ...
"There's plenty of bandwidth out there but it's never in the right place. So what Cedexis does is uses data to work out the best pathways to get data from the origin to the person who wants to get it," explained Simon Jones, Evangelist and Head of Marketing at Cedexis, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that CrowdReviews.com has been named “Media Sponsor” of SYS-CON's 22nd International Cloud Expo, which will take place on June 5–7, 2018, at the Javits Center in New York City, NY. CrowdReviews.com is a transparent online platform for determining which products and services are the best based on the opinion of the crowd. The crowd consists of Internet users that have experienced products and services first-hand and have an interest in letting other potential buye...
SYS-CON Events announced today that Telecom Reseller has been named “Media Sponsor” of SYS-CON's 22nd International Cloud Expo, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.