By Don Clark and Lisa Beilfuss 

HP Inc. logged a steeper-than-expected sales drop and cut the high end of its yearly guidance, the latest signs of the tough market conditions facing traditional technology firms.

HP is the personal-computer and printer business created by the breakup of Hewlett-Packard Co. last fall.

The other chunk, Hewlett Packard Enterprise Co., on Tuesday said it would merge most of its technology services operations with those of Computer Sciences Corp.--an $8.5 billion transaction that highlights the continuing turmoil in the corporate computing market as businesses rein in spending and traditional data centers give way to cloud computing. For HP, consumers' and businesses' shifts to mobile devices and away from printers and personal computers has made for tough selling conditions.

On Wednesday, HP Inc. Chief Executive Dion Weisler acknowledged that the demand environment for both PCs and printers is weak, but said the company continues to target niches where sales are growing and HP can boost its market share. In addition, Mr. Weisler said, the company has avoided competing for sales in areas such as low-cost PCs where profit margins are low.

"We are taking share where we choose to play," he said. "We are also being careful about what not to do." One example of recent efforts: HP has been focused on grabbing a bigger piece of the premium laptop market, one that has been healthier than some other segments of the shrinking PC industry.

In its latest quarter, HP reported a profit of $629 million, or 36 cents a share, down from $1.01 billion, or 55 cents a share, a year earlier. Excluding discontinued operations and other items, per-share profit rose to 41 cents from 39 cents, above the company's forecast for 35 cents to 40 cents.

Revenue fell 11% to $11.59 billion. Excluding adverse currency rates, sales declined 5%, HP said. Analysts projected 38 cents in adjusted earnings per share on $11.72 billion in revenue, according to Thomson Reuters.

The company said revenue in its personal systems business slid 10% from a year earlier, dragged by a 16% decline in consumer sales and a 7% fall in commercial revenue. On its printer side, revenue decreased 16%.

For the fiscal year ending in October, HP guided for $1.59 to $1.65 in adjusted per-share profit, cutting the high end of the range from $1.69. Analysts' average estimate is pegged at $1.59.

For the current quarter, the company expects to post 37 cents to 40 cents in adjusted earnings per share. That's a boost to the bottom end -- its forecast had been for 35 cents to 40 cents a share.

Write to Don Clark at don.clark@wsj.com and Lisa Beilfuss at lisa.beilfuss@wsj.com

 

(END) Dow Jones Newswires

May 25, 2016 16:23 ET (20:23 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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