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HP posts a 19% fall in quarterly profit

19 August 2009 10:10 (UTC +04:00)

Baku-APA-Economics. Hewlett-Packard Co. posted a 19% drop in quarterly profit as sales fell sharply in several of its key businesses, but the technology giant said it was seeing a "stabilized market" and suggested that technology spending has hit bottom.

The computer and printer maker produced earnings of $1.64 billion, or 67 cents a share, for the quarter ended July 31, down from $2.03 billion, or 80 cents a share, a year ago.

H-P’s quarterly revenue fell 2% to $27.45 billion from $28.03 billion a year earlier, despite several billion dollars in additional revenue from tech-services company Electronic Data Systems, which H-P acquired last year.

Still, the Palo Alto, Calif., company beat the quarterly forecasts it gave Wall Street in May and H-P reaffirmed its financial guidance from earlier this year.

"What’s driving revenue is a stabilized market in the United States and Asia Pacific," Cathie Lesjak, H-P’s chief financial officer, said in an interview. She said business is "still very tough" in Europe and the Middle East.

Her comments echoed those of other tech company executives recently. Cisco Systems Inc. said earlier this month that it believes tech spending has bottomed out and is poised to rebound.

H-P shares declined 2% in after-hours trading to $43.07 after ending 4 p.m. trading on the New York Stock Exchange at $43.96, up 85 cents.
While H-P’s overall results showed some weakness, "relative to expectations it was decent enough, and probably shows H-P has hit bottom," said Robert Cihra, an analyst at Caris & Co.
Mr. Cihra said H-P shares were likely down because investors had recently raised their expectations for the company. "I think H-P just may not have delivered any more than already anticipated," he added.
The quarter was H-P’s second consecutive period of declining revenue, as reduced corporate spending and falling PC prices slammed the entire tech sector.
Since Chief Executive Mark Hurd took over the company in 2005, H-P has slashed costs and steadily increased its profits, growing to be the world’s largest tech company by revenue and beating out PC competitors.
But since last year, the recession has hurt the company’s growth. In the latest quarter, revenue declined across almost all of H-P’s businesses.
The company, which is the world’s largest PC maker, reported PC revenue of $8.43 billion for the quarter, down 18% from last year, despite 2% growth in shipments. Operating profit in the PC division fell 34% as computer prices plummeted.
Pricing pressures are also weighing on H-P’s biggest rival, Dell Inc., which is set to report quarterly results Aug. 27. Wall Street is expecting Dell’s revenue to decline more than 20% in the quarter.
Revenue in H-P’s servers and storage division, which sells back-office computing equipment to businesses, fell 23% to $3.66 billion.
Meanwhile, H-P’s printer unit saw revenue decline 20% to $5.66 billion as customers cut back on ink and printing supplies.
In H-P’s software unit, operating profit rose 13%, despite a 22% revenue decline to $847 million.
The services business was a bright spot, said Bill Kreher, an analyst with Edward Jones. Services revenue was $8.47 billion, up 93% from a year ago before H-P had acquired EDS.
He said while it is difficult to figure out how the old EDS outsourcing business is doing since H-P now combines those results with H-P’s pre-EDS services unit, the unit’s 15.2% operating-profit margin exceeded his expectations.
H-P is cutting 24,600 jobs as part of the EDS deal, and in May announced a separate round of 6,400 job cuts. Source: Wall Street Journal.