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| Hewlett-Packard Co. reported declines of profit and sales in its most recent quarter om May 19, 2009. | ||
The company also said an additional 6,400 workers, or 2 percent of HP's 321,000-employee work force, will lose their jobs over the next year. The cuts will be on top of the 24,600 jobs HP was already dumping as part of its acquisition of Electronic Data Systems, a technology services provider HP bought for $13.9 billion last year to mount a bigger challenge to IBM Corp.
The new cuts will come from HP's product businesses. HP, whose products include PCs, printers, computer servers, ink and toner cartridges, did not provide more details.
HP's results, reported Tuesday after the market closed, muddies the picture of whether technology spending has fallen as far as it's going to in this recession. HP's outlook was not optimistic, and its shares fell in extended trading.
HP's chief financial officer, Cathie Lesjak, said in an interview that it's still "too tough to call" whether PC sales have hit a bottom.
That differs from what one of HP's major suppliers, Intel Corp., said last month. Intel's chief executive, Paul Otellini, said PC sales had "bottomed out" during the first three months of the year and appeared to be returning to normal patterns.
HP is the world's No. 1 seller of PCs, while Intel is the world's biggest supplier of microprocessors, the calculating engines of PCs.
Perhaps more telling is that the last quarter at HP ended April 30, so its analysis is based on later information than Intel had.
Palo Alto, California-based HP said it earned $1.72 billion, or 70 cents per share. Excluding restructuring and other one-time charges, HP earned 86 cents per share. Analysts were expecting a profit of 86 cents per share, but HP said it beat Wall Street's forecast because it included 2 cents per share of charges related to a patent dispute that analysts didn't factor into their estimates.
Sales fell 3 percent to $27.4 billion, which matched analyst estimates. HP says sales would have been up 3 percent were it not for currency fluctuations.
Shaw Wu, an analyst with Kaufman Bros., said the quarter was "quite good" considering the state of the economy but added the revenue outlook was a "little light." That was surprising because investors had higher hopes about HP's resiliency, driving up the stock price 40 percent since March.
"With the stock run-up, this is likely viewed as disappointing," Wu said. "But we believe HP is still positioned to weather the storm better than most."
HP says PC shipments stayed flat year-over-year, but revenue from those machines fell. The recession has caused retailers to slash prices on PCs to lure customers into the stores, which is one explanation for how HP can make less money on roughly the same number of machines. The growing popularity of mini-laptops called "netbooks" - which are cheaper and carry lower profit margins than regular laptops - also skews the numbers.
Laptop revenue fell 13 percent to $4.7 billion. Desktop computer sales were down 24 percent to $3 billion. HP said some areas improved, particularly China and consumer sales in the U.S.
In HP's printer and printer-ink division, overall sales were down 23 percent to $5.9 billion. Within that, supplies revenue - which includes ink - fell 14 percent. Lesjak said the decline was only partially caused by weakened demand from users. A big reason for the decline was HP adjusting the amount of ink it had in resellers' inventory, she said.
The division for enterprise storage and servers, whose fortunes are tethered to fluctuations in spending by businesses, saw its sales fall 28 percent to $3.5 billion. Hardware sales are down across the industry because corporations are not buying as many new computers or servers. Instead they are putting off orders or canceling them altogether.
"The systems market is still a crater - people still just aren't back to buying stuff, and obviously there isn't much sign of relief," said Martin Reynolds, a vice president at research firm Gartner Inc. "The main thing is everyone is relieved - we've stopped going down as fast as we were. Everyone seems to be OK
bumping along the bottom like we are now."
Because of the EDS acquisition, services are now the biggest part of HP's business. Nearly a third of HP's overall revenue came from services in the latest period. HP had $8.5 billion in services revenue.
Services is also now HP's biggest moneymaker, eclipsing the printer and ink division that has long been HP's profit machine.
HP kept its profit forecast at $3.76 to $3.88 per share for fiscal 2009, stripping out one-time charges. But it also indicated a sharper sales decline was in sight. After previously predicting that its full-year sales would decline 2 percent to 5 percent, HP narrowed that range Tuesday to 4 percent to 5 percent.
HP shares fell $1.78, or 4.9 percent, to $34.80 in extended trading. Before the results were announced, HP closed up 85 cents, or 2.4 percent, in regular trading at $36.58.
(AP)
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