HP 2015 Annual Report Download - page 74

Table of Contents
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license and support revenue. In fiscal 2015, net revenue growth was negatively impacted by foreign currency fluctuations across all regions, led primarily by
weakness in the euro.
In fiscal 2015, net revenue from licenses, professional services, SaaS and support decreased by 13%, 8%, 3% and 3%, respectively. The decrease in
license revenue was due primarily to the market shift to SaaS solutions and sales execution challenges and, as a result, we experienced lower revenue in IT
Operations Management. Professional services net revenue decreased due primarily to unfavorable currency impacts, our continued focus on higher-margin
engagements, and, as a result, we experienced a net revenue decrease in big data solutions, partially offset by net revenue growth in security products. SaaS
net revenue decreased due primarily to sales execution challenges, which resulted in lower revenue from big data solutions, partially offset by net revenue
growth in IT Operations Management. The decrease in support revenue was due primarily to unfavorable currency impacts and past declines in license
revenue, partially offset by growth in revenue for security products.
In fiscal 2015, Software earnings from operations as a percentage of net revenue decreased by 0.4 percentage points due to a decrease in gross margin and
an increase in operating expenses as a percentage of net revenue. The decrease in gross margin was due primarily to a lower mix of license revenue. The
increase in operating expenses as a percentage of net revenue was due to the size of the revenue decline. During the period, operating expense declined due
primarily to favorable currency impacts and lower SG&A expenses as a result of lower field selling costs driven by expense management.
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Software net revenue decreased 2.3% (decreased 2.2% on a constant currency basis) in fiscal 2014. Revenue growth in Software was challenged by the
overall market and customer shift to SaaS solutions, which is impacting growth in license and support revenue. In fiscal 2014, net revenue from licenses,
support and professional services decreased by 3%, 2% and 6% respectively, while SaaS net revenue increased by 5%.
The decline in license net revenue was due to the market and customer shift to SaaS solutions, which resulted in lower revenue from IT/cloud
management and information management products, partially offset by strength in some of our key focus areas of big data analytics and security. The
decrease in support net revenue was due to past declines in license revenue. Professional services net revenue decreased as we continued our focus on higher-
margin engagements. These declines were partially offset by higher SaaS revenue due to improving demand for our SaaS solutions in IT/cloud management
products and security products.
In fiscal 2014, Software earnings from operations as a percentage of net revenue remained flat in percentage points. There was an increase in gross
margin, the effect of which was offset by an increase in operating expenses as a percentage of net revenue. The increase in gross margin was due to the shift to
more profitable contracts and improved workforce utilization in professional services. The increase in operating expenses as a percentage of net revenue was
due primarily to investments in R&D partially offset by lower SG&A expenses due to cost savings associated with our ongoing restructuring efforts and
improved operational expense management.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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