ing Porter뭩 Five Forces with relation to the PC, Server/Workstation, and E-services market. Section 6 Financial Considerations Sales/Sales Growth HP sells considerably more than the industry standard, showing the level of market penetration HP has developed over the span of existence. While HP뭩 sales are well above industry, its overall sales growth in 1998 has dropped 11%. This would be a reflection of the slowing and reduced profit margins in the PC market. Income/Income Growth Again, HP뭩 1998 income is above industry standards, showing HP still has profits in the dwindling PC market. However, HP뭩 income growth dropped in 1998 and is below industry, leading HP to evaluate its financial condition. In evaluating financial considerations, other emerging markets have been entered. Net Profit Margin/ Debt-Equity Ratio HP뭩 net profit margin has consistently been in the 7.3% - 7.7% range in the past 5 years. In 1998, the NPM was 7.3%, lowest of the past 5 years. To increase this margin, HP should review costs, and identify costs that can be reduced. Increasing prices is another option to increase profit margins, but given the PC market, is not an option for HP. Entrance into new markets like the server and E-services should help the profit margin since the profits are currently higher in these markets compared to PCs. HP뭩 debt-equity ratio is well below average; this is a positive trend, and show that HP has not borrowed heavily long-term against its equity. HP뭩 Five Year Financial Trends HP뭩 revenue and earnings has consistently increased over the past 5 years, of course due to the surge in PC purchases and related products. In 1998, the net earnings did fall below its 1997 earnings while revenue continued to increase (costs increased at a higher rate than revenue). This can be seen in the increase in 1998 costs associated with products sold and services. These costs increased 2.1% to ...
