HPQ HP Inc

   (FROM THE WALL STREET JOURNAL 11/25/15) 
   By Robert McMillan 

HP Inc. and Hewlett Packard Enterprise Co. became separate companies on Nov. 1., but on Tuesday, they offered forecasts that shed a harsh light on the market conditions that the newly minted siblings must face alone.

For HP, the problem is simple: The world is enthralled by mobile phones and moving away from the printers and personal computers that made up the bulk of the company's $12.7 billion revenue in the fourth quarter ended in October.

"It was a pretty tough market dynamic," said HP Inc. Chief Executive Dion Weisler. Printer and PC sales were both down 14% year on year, and the company offered a weaker-than-expected profit forecast for both the current quarter and the year ahead, forcing HP Inc. to accelerate its cost-cutting measures.

The company had planned to lay off 3,300 employees over the next three years, but it is accelerating that program and expects the layoffs to be completed within the year. Mr. Weisler said the company was looking at additional cuts: "We are certainly looking at the nonrevenue-generating expenses of the organization."

Mr. Weisler said he was hoping for a breakthrough hit when the company introduces a new 3-D printer next year.

HP Enterprise CEO Meg Whitman joined Mr. Weisler in reporting the last-ever quarterly earnings of their former company. Her challenge is to find a way to earn profits in an era when companies are increasingly use cloud-computing services that run predominantly on equipment HP Enterprise doesn't sell.

Earlier this year, H-P redoubled efforts to sell low-cost servers to cloud computing companies, and those efforts are bearing fruit, Ms. Whitman said. Sales of low-cost servers based on Intel Corp.'s microprocessors were up 5%, year on year.

For the current quarter, HP Inc. forecast earnings per share between 33 cents and 38 cents a share, significantly below the 42 cents analysts expected according to a survey conducted by Thomson Reuters. For fiscal 2016, earnings will be in the $1.59 to $1.69 range, below the $1.71 expected by analysts.

The tough times are nothing new to Ms. Whitman and Mr. Weisler. The combined H-P has reported a revenue decline in 16 of its past 17 quarters.

Although revenue numbers are likely to change slightly as the independent companies figure out precisely how to credit joint sales, HP Enterprise reported segment revenues of $14.1 billion for the quarter, while at HP Inc. revenues totaled $12.7 billion.

Because H-P reported the results as a combined company, it didn't break down profit performance for the two new entities. On a combined basis, earnings were 93 cents per share, excluding certain charges. Analysts had been expecting 97 cents per share.

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(END) Dow Jones Newswires

November 25, 2015 02:47 ET (07:47 GMT)

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