H-P's Earnings, Revenue Slide
August 20 2015 - 5:00PM
Dow Jones News
Hewlett-Packard Co. posted a 13% drop in earnings for the July
quarter as the company reported its 15th quarterly revenue decline
in the past 16 quarters.
H-P is set to split into two entities on Nov. 1, but the company
continues to struggle as technology shifts toward mobile and cloud
computing.
H-P's split will create very different companies: a
cash-generating PC-and-printer behemoth that racked up $56 billion
in revenue its most recent fiscal year, and a $55 billion server,
services and software company that Chief Executive Meg Whitman has
portrayed as more likely to grow through acquisitions.
For the fiscal year ending Oct. 31, the company narrowed its
per-share earnings estimate to $3.59 to $3.65, from its previous
estimate for per-share profit of between $3.53 and $3.73, excluding
certain items.
Shares fell 3.8% to $26.30 in recent after-hours trading as
revenue missed expectations.
For its third quarter, ended July 31, HP reported net income of
$854 million, or 47 cents a share, down from $985 million, or 52
cents, a year earlier. Excluding certain items, per-share earnings
fell to 88 cents from 89 cents. The company had guided for 83 cents
to 87 cents a share.
Revenue decreased 8% to $25.3 billion. Excluding currency
fluctuations and divested businesses, revenue dropped 2%. Analysts
polled by Thomson Reuters were looking for $25.44 billion.
Come November, the new companies will face a separate set of
challenges. Hewlett-Packard Enterprise must deal with a rapidly
changing corporate computing environment. HP Inc.'s profits will
come from its printer business, which sells lucrative ink
cartridges. But the company will face a tough challenge with its PC
business.
"When HP Inc. is independent, you're probably going to see them
becoming more scrappy," said Jay Chou, an analyst with industry
research firm IDC. "A lot of their products are just
commodity-based PCs. There's not a lot of room for extra revenue
from things like services and so on."
H-P is the world's number-two PC vendor, behind Lenovo Group
Ltd. But unit sales of H-P PCs fell nearly 10%, year-over-year,
during the second quarter, according to IDC. And even the
introduction of Microsoft Corp.'s new Windows 10 operating system
has failed to ignite sales of new personal computers.
Part of the problem is that emerging markets such as China,
Indonesia and Latin America are snubbing PCs for less-costly
alternatives, said Mr. Chou. "We're seeing a lot of these emerging
markets, in a lot of cases, skip the PC altogether and use either a
smartphone or tablet as their primary way of getting on the
Internet," he said.
H-P's stock has been hit hard over the past year, dropping 22%.
That's a worse performance than H-P's biggest rival, International
Business Machines Corp., whose shares have fallen 20% over the same
period.
Write to Robert McMillan at Robert.Mcmillan@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 20, 2015 16:45 ET (20:45 GMT)
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