HP 2015 Annual Report Download - page 71

Table of Contents
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particularly All-flash arrays, and StoreOnce. BCS net revenue decreased 13% largely as a result of contraction in the overall UNIX market. TS net revenue
decreased 9% due primarily to a reduction in support for BCS and traditional storage products along with lower revenue from consulting services, the effects
of which were partially offset by growth in HP Data Center Care and HP Proactive Care support solutions.
In fiscal 2015, EG earnings from operations as a percentage of net revenue decreased by 0.1 percentage point due to a decrease in gross margin partially
offset by a decrease in operating expenses as a percentage of net revenue. The decrease in gross margin was due primarily to a higher revenue mix of ISS
products, unfavorable currency impacts and competitive pricing, the effects of which were partially offset by improved cost management, improved pricing in
Storage and a higher gross margin contribution in Networking from Aruba. The decrease in operating expenses as a percentage of net revenue was due
primarily to favorable currency impacts, partially offset by expenses during the period from Aruba.
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EG net revenue decreased 1.0% (decreased 0.6% on a constant currency basis) in fiscal 2014. In EG, we continued to experience revenue challenges due
to market trends, including the transition to cloud computing, as well as product and technology transitions, along with a highly competitive pricing
environment. The decline in EG net revenue was due to net revenue declines in TS, BCS and Storage partially offset by net revenue growth in ISS and
Networking.
TS net revenue decreased 4% due primarily to a continued reduction in support for BCS, traditional storage products and lower support in networking
services, partially offset by growth in support solutions for Converged Storage solutions and ISS. BCS net revenue decreased 22% as a result of ongoing
pressures from the overall UNIX market contraction. Storage net revenue decreased by 5% as we continue to experience multiple challenges including
product transitions from traditional storage products which include our tape, storage networking and legacy external disk products, to converged solutions,
which include our 3PAR StoreServ, StoreOnce, and StoreVirtual products, other challenges include market weakness in high-end converged solutions and
sales execution challenges, the effects of which were partially offset by revenue growth in our Converged Storage solutions. Networking net revenue
increased 4% due to higher switching product revenue as a result of growth in our data center products, partially offset by lower revenue from WLAN
products. ISS net revenue increased by 3% due primarily to higher volume and higher average unit prices in rack and blade server products driven by higher
option attach rates for memory, processors and hard drives.
EG earnings from operations as a percentage of net revenue decreased by 0.8 percentage points in fiscal 2014 due to a decrease in gross margin coupled
with an increase in operating expenses as a percentage of net revenue. The gross margin decline was due primarily to a higher mix of ISS products, a lower
mix of BCS products and competitive pricing pressure in ISS and Networking, partially offset by supply chain cost optimization and improved cost
management in TS. The increase in operating expenses as a percentage of net revenue was driven by higher R&D investments in storage, networking and ISS,
partially offset by continued cost savings associated with our ongoing restructuring efforts.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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