HP Inc. Revenue Declines; Full-Year Guidance Cut--Update
May 25 2016 - 07:39PM
Dow Jones News
By Don Clark and Lisa Beilfuss
HP Inc. posted a steeper-than-expected sales drop in its most
recent quarter, the latest sign of tepid demand for personal
computers and printers.
The company, one of two created last fall by the breakup of
Hewlett-Packard Co., reported that net income was 38% lower than
the prior quarter and issued a forecast for the fiscal year that
was lower than some analysts expected.
But the Palo Alto, Calif., company topped its own guidance for
quarterly profit and said it is hitting its financial targets.
"Across all the areas of the business we are doing exactly what we
said we would do," Dion Weisler, HP's chief executive, said in an
interview.
The company's stock price, after dipping initially after hours,
rebounded to rise 1.3%.
HP's earnings release came a day after its former sister
operations, now the separate company Hewlett Packard Enterprise
Co., said it would merge most of its technology services operations
with those of Computer Sciences Corp.
Where HP Enterprise focuses mainly on hardware and software for
data centers, Mr. Weisler's company's business is tied to the
slower-growing markets for PCs and printers. He acknowledged that
demand for both products has been 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 where profit margins are low, such as low-cost
PCs.
"We are taking share where we choose to play," he said. "We are
also being careful about what not to do."
The company said revenue in its personal systems business slid
10% from a year earlier, dragged down by a 16% decline in consumer
sales and a 7% fall in commercial revenue. On its printer side,
revenue decreased 16%.
Over all, HP reported net income of $629 million, or 36 cents a
share, down from $1.01 billion, or 55 cents a share, a year
earlier. Adjusted to exclude 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, or 5% excluding adverse
currency rates. Analysts had projected 38 cents in adjusted
earnings per share on $11.72 billion in revenue, according to
Thomson Reuters.
For the fiscal year ending in October, HP projected adjusted
per-share earnings of $1.59 to $1.65, compared with a prior range
of $1.59 to $1.69. The change reduces the midpoint of HP's forecast
from $1.64 to $1.62, compared with average estimate of $1.59.
Bill Kreher, an analyst at Edward Jones, called the projection
surprising, since the company topped profit expectations in the
second quarter. "The guidance seems a bit underwhelming," he
said.
For the current quarter, the company expects to post 37 cents to
40 cents in adjusted earnings per share. Analysts' average
projection was 40 cents.
Over the long term, Mr. Weisler is betting partly on a rebound
in customer demand and partly on innovative new products. New
offerings include the company's first line of 3-D printers, which
were formally unveiled last week.
Write to Don Clark at don.clark@wsj.com and Lisa Beilfuss at
lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
May 25, 2016 19:24 ET (23:24 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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