H-P Shares Down Following Earnings Decline
By Dan Gallagher
Hewlett-Packard Co. saw its shares dip in morning trading Wednesday after the
high-tech giant reported a 17% decline in the fiscal second-quarter earnings as
sales fell across nearly all its business lines, especially PCs, servers and
printers.
H-P also unveiled plans to lay off another 6,000 workers - on top of
previously announced job cuts - as it continues to reduce expenses.
In the quarter ended April 30, H-P reported earnings of $1.7 billion, or 70
cents a share, down from $2.1 billion, or 80 cents a share, in the year-earlier
quarter. Sales fell 3% to $27.4 billion. A tight lid on costs helped H-P match
Wall Street's estimates. The company said it would have earned $2.1 billion, or
86 cents a share, on a non-GAAP basis. The results also included a charge of 2
cents a share related to a patent dispute.
Analysts were expecting earnings of 85 cents a share on revenue of $27.5
billion, according to consensus estimates from FactSet Research.
Shares of H-P (HPQ), however, were recently down 3.6% after the company issued
a forecast for the third quarter that was basically in line with Wall Street's
estimate. Some investors were hoping the company would raise guidance.
H-P said it expects revenue to remain flat to down 2% compared to the second
quarter. Wall Street has expected revenue to remain flat.
Earnings per share, excluding one-time charges, are expected to range from 88
cents to 90 cents.
Jayson Nolan of Robert W. Baird said H-P pushed back a planned analyst meeting
to September, "which would imply limited current visibility."
In a conference call, Chief Executive Mark Hurd said the date of the meeting
was switched to allow the company to have a better read on its business in the
current economy.
"We want to give you more information, not less," he told analysts.
Services overtakes PCs
Revenue fell across nearly all of the company's business lines during the
quarter.
The one exception was H-P's services business, which got a strong boost from
the addition of Electronic Data Services, or EDS, which H-P acquired last year
in a deal worth more than $14 billion. That acquisition helped revenue in the
service unit jump 99% to $8.5 billion for the quarter - making it the company's
largest business unit.
"We have built a very strong pipeline with EDS," Chief Financial Officer
Cathie Lesjak said in an interview. "We've gotten deals that H-P would never
have gotten without EDS, and deals EDS would never have gotten without H-P. It
justifies the acquisition, from our perspective."
The PC business - historically H-P's largest revenue base - saw revenue slide
19% to $8.2 billion. Revenue from desktop computers fell 24% while laptop
revenues fell 13%. Operating profit for the group was $374 billion - down from
$544 billion last year.
The printing and imaging business saw revenue fall 23% to $5.9 billion.
Printer unit shipments fell 27% while supply revenue fell 14% from the same
period last year.
H-P's software business saw revenue fall 15% to $880 million.
More cost cuts, layoffs
In the earnings call, Hurd said the company is ahead of schedule integrating
the EDS acquisition. The company is more than halfway through the planned
workforce reduction of 25,000 employees that it outlined last year.
Hurd also said the company has found an additional $500 million in cost
savings - mostly through facilities and other real estate commitments that will
be eliminated.
"This is one of many examples where we are dramatically changing the expense
profile of the company and making steady progress toward our goal of having the
industry's best cost structure," Hurd said.
H-P also said it will lay off an additional 2% of its workforce - beyond the
number it spelled out last year - over the next 12 months. That equates to about
6,000 more job cuts at the company.
-Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
05-20-091021ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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