HPQ HP Inc

By Don Clark 

Hewlett Packard Enterprise Co. and HP Inc. capped their first year as separate companies with mixed quarterly results, underscoring headwinds in some of their top businesses.

The former units of Hewlett-Packard Co. each reported sharp profit declines largely because of one-time charges. HP Enterprise said profit in its fourth fiscal quarter fell 78% on revenue that declined 7.2%.

HP Inc.'s earnings fell 63%. But the company mustered a surprise 2% revenue increase after seven consecutive quarterly declines, as the improving health of its personal computer business offset a printing revenue drop.

Dion Weisler, HP's chief executive, called the quarter "a nice roundup to a very challenging but solid year of execution."

Some of their fourth-quarter results and elements of their business projections came in below analysts' expectations. HP Enterprise's shares declined 1.5% in after-hours trading; HP's stock fell 2.5%.

HP Enterprise sells a broad line of hardware, software and services aimed at corporate buyers. But its chief executive, Meg Whitman, who pushed for the breakup, has since cut deals to shed major services and software businesses to focus on servers, networking and data storage.

The increased emphasis on data-center hardware comes as demand for some product categories has weakened. Rival Cisco Systems Inc. last week reported that sales of its flagship switching systems declined 7%, while sales in the unit that includes servers slid 3%.

HP Enterprise on Tuesday said its server revenue declined 7% in the fourth quarter. Storage revenue fell 5%, while networking revenue declined 34%.

But Ms. Whitman on a conference call pointed to rapid growth in several hardware categories, including high-performance computers and some Wi-Fi equipment. Meanwhile, HP Enterprise continued to generate cash that has helped boost its share price through dividends and stock buybacks. The company said its cash flow from operations rose 44% to $2.2 billion in the fourth quarter. "We performed well in a tough market," said Tim Stonesifer, HP Enterprise's finance chief.

HP Enterprise reported net income for the fourth period ended Oct. 31 of $302 million, or 18 cents a share, compared with profit in the year-earlier period of $1.39 billion, or 75 cents a share. Revenue declined to $12.48 billion from $13.45 billion.

On an adjusted basis that excludes restructuring charges and other one-time items, HP Enterprise put fourth-quarter earnings per share of 61 cents. The company in September had projected a range of 58 cents to 63 cents a share, while analysts polled by FactSet had predicted per-share profit of 60 cents on revenue of $12.79 billion.

For the current quarter, HP Enterprise said it expects to report adjusted earnings per share of 42 cents to 46 cents. Analysts' average estimate was 46 cents, according to FactSet.

HP, meanwhile, also has faced pressure as consumers have shifted spending from PCs to mobile devices and fewer people print documents. But the company has shown some success in stemming the decline in PCs by taking a bigger share of the declining market and focusing on models that command higher prices and profit margins.

Gartner Inc. recently estimated that HP's share of third-quarter PC shipmentsm which declined 5.7% for all suppliers in the period, rose to 20.4% from 18.8% in the year-earlier period. HP said Tuesday that unit shipments rose 5% while PC revenue was up 4%.

The story was less rosy in printers, though Mr. Weisler pointed to signs of progress there, too. HP said total revenue in the business declined 8%, with revenue from ink and toner down 12%. But hardware unit revenue grew 1%, the first time in recent memory, he said. And declines by other metrics were less severe than earlier this year, Mr. Weisler said.

Mr. Weisler said Tuesday that his company generated $2.8 billion in free cash flow in the fiscal year ended in October -- more than the company had projected -- and returned 72% to shareholders in dividends and stock buybacks.

In all, HP Inc. reported net income for the period ended Oct. 31 of $492 million, or 28 cents a share, compared with profit in the year-earlier period of $1.32 billion, or 73 cents. Revenue rose to $12.51 billion from $12.27 billion.

On an adjusted basis that excludes restructuring charges and other one-time items, HP put fourth-quarter earnings per share at 36 cents, compared with its projection in September of 34 cents to 37 cents. Analysts on that basis had predicted per-share profit of 37 cents on revenue of $11.83 billion, according to FactSet.

For the first fiscal quarter, HP said it expects to report adjusted earnings per share of 35 cents to 38 cents. Analysts' average estimate was 39 cents, according to FactSet.

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

November 23, 2016 02:47 ET (07:47 GMT)

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