HP profit falls as sales decline amid restructuring
CALIFORNIA, United States
HEWLETT-PACKARD Co was hurt in the latest quarter by declines in several of its key businesses and heavy restructuring charges, a sign of the challenges confronting new CEO Meg Whitman.
Net income plunged 91 per cent to US$239 million ($20.5 billion), or 12 cents per share, in the quarter ended October 31. That’s down from US$2.54 billion, or US$1.10 per share, in the same period a year ago.
Excluding items, HP earned US$1.17 per share. Analysts polled by FactSet expected US$1.13 on that basis.
Meanwhile, revenue fell three per cent to US$32.12 billion. Analysts expected US$32.05 billion.
HP shares fell 26 cents, or less than one per cent, to US$26.60 in extended trading, after the results were reported. In Monday’s regular trading session, the stock fell US$1.13, or four per cent, to US$26.86.
Wall Street believes HP’s outlook leaves something to be desired. The company’s forecast was lower than most analysts’ targets. HP said it was being “cautious”, without immediately elaborating on the reasons for why.
Analyst Brian White with Ticonderoga Securities called the outlook “weak” but said the stock has some appeal in investors because of its previous declines. Indeed, the stock has fallen 40 per cent since CEO Mark Hurd was ousted last year in an ethical scandal.
“HP has valuation on its side and expectations are low, however, we believe this turnaround story will take time to play out and the darkening macroeconomic environment is only likely to hinder this cause,” White wrote in a note to clients.
The profit decline in the latest quarter was caused in large part by US$3.3 billion in charges
for HP’s earlier decision to kill its tablet and smartphone businesses, as well as other write-downs and acquisition costs. Revenue in three of HP’s biggest divisions — personal computers, printers and ink, and servers and networking — fell as well.
Whitman faces a real test as she attempts to pull together a conglomerate beset by growing pains and managerial strife. She is HP’s third CEO in a year and a half. Though HP is the world’s largest information technology company by revenue, the company has had a hard time deciding whether it wanted to grow even bigger or start getting smaller.
Hurd’s successor Leo Apotheker was ousted this year over his botched handling of key initiatives, particularly HP’s plans to try and sell or spin off its PC division. Those plans leaked early to the press. Whitman has now decided to keep the PC division.
