HP Earnings Slide as Printing Business Continues to Struggle -- Update
November 26 2019 - 6:30PM
Dow Jones News
By Aaron Tilley
HP Inc. posted lower fiscal fourth-quarter earnings as its
printing business remained weak, helping to spur an increasingly
acrimonious takeover approach from rival Xerox Holdings Corp.
HP said Tuesday its net income fell to $388 million from $1.45
billion a year earlier, when the company's results were boosted by
a one-time tax benefit. For the quarter ended Oct. 31, HP reported
per-share earnings of 26 cents, down from 91 cents and short of the
51 cents analysts surveyed by FactSet expected.
Adjusted earnings, though, rose 11% to 60 cents a share, ahead
of the 58 cents analysts expected. For the current year, the
company projects adjusted per-share earnings of $2.24 to $2.32,
ahead of analysts' estimates.
HP shares rose 1.25% in after-hours trading.
The company that is focused on selling computers and printers
since Hewlett-Packard Co. split in 2015 said revenue for the
quarter edged higher to $15.41 billion compared with $15.37 billion
a year ago. The struggling printer business logged a 6%
year-over-year drop in sales. Revenue for the larger
computer-making unit rose 4%, the company said, boosting the top
line.
The financial results cap a tumultuous fiscal year for HP,
coming at a time when talks with Xerox have raised questions about
its future. In August, HP Chief Executive Dion Weisler stepped
down, citing a family health matter. HP also has been struggling
with falling demand in its printing business, which had been a key
profit driver. That has weighed on the stock.
HP veteran Enrique Lores, who has taken over as CEO, last month
announced the company would be eliminating around 7,000 to 9,000
jobs, or 16% of its workforce. The three-year restructuring program
aims to generate $1 billion in annual savings, the company has
said.
Xerox, which announced its own cost-cutting plan in February,
formally approached HP about a possible takeover earlier this
month. The $33 billion offer, first reported by The Wall Street
Journal, would combine two of the most iconic names in office and
home printing as they face pressure from reduced demand.
HP has rejected Xerox's offer, which it said undervalued the
company, though it added it was open to talks. "HP has numerous
opportunities to create value for HP shareholders on a standalone
basis," the company said in a letter to Xerox. "We will not let
aggressive tactics or hostile gestures distract us from our
responsibility to pursue the most value-creating path."
Xerox Chairman John Visentin, in a letter sent to HP on Tuesday,
said the company would now directly engage with HP shareholders to
convince them of the merits of a deal.
Activist investor Carl Icahn, who has a 10.6% stake in Xerox, is
backing the combination and has taken a 4.24% stake in HP, the
Journal has reported.
"Our strategy is working," Mr. Lores said in a statement, adding
he was confident in the business headed into the current fiscal
year. HP declined to comment further on Xerox's offer.
(END) Dow Jones Newswires
November 26, 2019 18:15 ET (23:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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