Irv Rothman, president and
chief executive of HP Financial Services, the second-largest IT
leasing captive in the world, speaks to Jason T Hesse about his
business and where he sees the market going.
In charge of over 1,100 employees
globally, Irv Rothman sees the global economic downturn as a
challenge to overcome. HP Financial Services is IT equipment giant
Hewlett-Packard’s captive finance company, and is present in 40
countries directly, with another 10 countries indirectly.
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“My job is to support Hewlett-Packard globally,” Rothman says.
“As a captive, it’s our job to reflect the parent company’s
strategy. Our strategy is to understand where Hewlett-Packard can
use our services best in every customer segment and in each product
group, and to try and create products and offers that reflect what
Hewlett-Packard is trying to do.”
“A pretty good
result”
When Hewlett-Packard (HP)
reported its third-quarter results last month, Rothman told Leasing
Life that he was “pleased” with HP Financial Services’
contribution.
The lessor recorded a growth in
financing volume of 12 percent and a growth in net portfolio assets
of 6 percent, to $9.2 billion (€6.4 billion). At $670 million,
revenue in the third quarter was 1 percent down year-on-year, but
this was due to the effects of currency fluctuations, as Rothman
points out.
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By GlobalData“If you look at our revenue on a
constant currency basis, it was actually up by 7 percent,” he
explains. “So all in all, we thought it was a pretty good result,
especially in light of the challenging economic environment.”
Funded by a combination of internal
and external cash, HP Financial Services’ success is measured on
return on equity, but also on revenue and operating profit.
“I’ve been pleased with our progress
this year. The growth in assets means that not only have we grown
our financing volume, but also that our portfolio is performing
well. It’s our job to provide financing to help Hewlett-Packard
sell products and services, and they provide us with a great
opportunity to do that,” he continues, emphasizing HP’s impressive
$27.5 billion revenues last quarter. “With our parent company’s
balance sheet, we don’t have the liquidity issues that a lot of
other companies in the market place have been dealing with over the
past year and a half or so.”
Rothman adds that in addition to its
own balance sheet, HP supplements the cash balance with external
borrowing, depending on HP Financial Services’ needs.
2010 and beyond
In the next financial year, HP
Financial Services’ mission is to continue to reflect HP’s
strategy, Rothman explains.
For example, HP Financial Services
will continue to push its services and outsourcing products next
year. HP acquired IT outsourcing firm EDS in 2008, which, according
to Rothman, gave the captive the chance to make a big push into the
market.
“The acquisition has exponentially
expanded our opportunities – and we intend to take advantage of
that. We’ve begun to take advantage of it this year, and will take
even more advantage of it in the years going forward.”
Just last month, HP Financial Services
signed a major deal for EDS in Sweden. The deal, between EDS and
Länsförsäkringar, a banking and insurance firm, will be financed by
HP Financial Services to the tune of $73 million.
Under the terms of the agreement, HP
will provide Länsförsäkringar with servers, storage, as well as
workplace and applications management services, which HP Financial
Services will lease to the bank.
Positive outlook
Rothman says that the market is
still strong for captive finance companies, as they can help
businesses to be in a good shape when the economy improves – which
he has no doubt it will.
He believes that smart companies are
still making sure that their IT infrastructure is in good shape,
and they are using captives, such as HP Financial Services, to help
them manage through the downturn.
“It’s our business to assess, to take
and to manage risk, and we’re comfortable with that. We have a
richly experienced management team who have gained the requisite
experience necessary to understand how to work through these
difficult economic cycles. There’s a lot of opportunity for us
going forward.”
