HP profit drops 17%, in line with estimates
Hewlett-Packard Co.’s quarterly profit dropped 17% on lighter sales in two key areas, personal computers and printer ink, a sign that the woes in consumer technology spending have dragged on beyond the miserable holiday season.
The company also said an additional 6,400 workers, or 2% of HP’s 321,000-employee workforce, would lose their jobs over the next year as part of HP’s digestion of Electronic Data Systems, a technology services provider HP bought for $13.9 billion last year to mount a bigger challenge to IBM Corp.
HP was already dumping 24,600 jobs as part of that acquisition before the extra cuts were announced Tuesday.
HP’s results, reported after the market closed, muddies the picture of whether technology spending has fallen as far as it’s going to. HP’s outlook was not optimistic, and its shares fell in extended trading.
HP’s chief financial officer, Cathie Lesjak, said it was still “too tough to call” whether PC sales had hit a bottom.
That differs from what one of HP’s major suppliers, Intel Corp., said last month. Intel’s chief executive, Paul Otellini, said PC sales had “bottomed out” during the first three months of the year and appeared to be returning to normal patterns.
HP is the world’s No. 1 seller of PCs; Intel is the world’s biggest supplier of microprocessors, the calculating engines of PCs.
Perhaps more telling is that the last quarter at HP ended April 30, so its analysis is based on more recent information than Intel’s.
Palo Alto-based HP said it earned $1.72 billion, or 70 cents a share. Excluding restructuring and other one-time charges, HP earned 86 cents a share. Analysts were expecting a profit of 86 cents, but HP said it beat Wall Street’s forecast because it included 2 cents of charges related to a patent dispute that analysts didn’t factor into their estimates.
Sales fell 3% to $27.4 billion, which matched analyst estimates. HP says sales would have been up 3% were it not for currency fluctuations.
HP says PC shipments stayed flat year-over-year, but revenue from those machines fell. The recession has caused retailers to slash prices on PCs to attract customers to the stores, which is one way HP can make less money on roughly the same number of machines.
Laptop revenue fell 13% to $4.7 billion. Desktop computer sales were down 24% to $3 billion.
In HP’s printer and printer-ink division, overall sales were down 23% to $5.9 billion. Within that, supplies revenue -- which includes ink -- fell 14%. Lesjak said the decline was only partially caused by weakened demand from users. A big reason was HP’s adjusting the amount of ink it had in resellers’ inventory, she said.
HP kept its profit forecast at $3.76 to $3.88 a share for fiscal 2009, stripping out one-time charges. But it also indicated a sharper sales decline was in sight. After previously predicting that its full-year sales would decline 2% to 5%, HP narrowed that range Tuesday to 4% to 5%.
Before the results were announced, HP closed up 85 cents, or 2.4%, at $36.58 in regular trading. But shares fell to as low as $34.75in extended trading.
