The financial slump at Hewlett-Packard continues but its shares rally amid optimism that it has turned a corner
HP has posted mixed results for its second quarter that reflect the myriad problems facing the PC and printer maker.
Yet while the figures were far from awe inspiring, they were not as bad as Wall Street had feared, prompting a mild share surge amid growing confidence that the worst is over for HP.
The figures show HP is still making a profit after it posted net income of $1.1bn (£731m) or $0.55 (£0.36) a share. However, this was down 32 percent from the $1.6bn (£1.1bn) or $0.80 (£0.53) per share from the same quarter last year.
There was a similar story of declines in revenue as well, after sales fell 10 percent to $27.6bn (£18.3bn) from $30.7bn (£20.4bn) a year ago.
A survey of analysts had predicted HP would post $0.81 (£0.54) a share on revenue of $28.12 billion (£18.7bn).
“We beat the upper end of our non-GAAP diluted EPS outlook for the quarter by $0.05 per share, driven by better than expected performance in Enterprise Services and Printing, coupled with the accelerated capture of restructuring savings and improvement in our operations,” said Meg Whitman, HP president and CEO.
An examination of the individual performance of the different units within HP reveals reasons for another tough quarter for the company.
The company continued to be battered by the declining PC market, after sales at its Personal Systems division fell 20 percent year-over-year. The company sold 21 percent fewer PCs and laptops during the period, compared to a year ago.
There was a decline for the printer unit too, where revenue fell one percent year over year and total hardware units were down 11 percent year over year.
The Enterprise group recorded a 10 percent decline in revenue, while Services revenues dropped eight percent year over year. Software revenue was down three percent year over year and HP Financial Services revenue was down nine percent.
Despite the dips in bottom-line numbers, HP investors took heart from the results, like they did in the previous quarter, leading to a slight share surge.
“The results were better than feared,” Bill Kreher, an Edward Jones analyst, told the Associated Press. Indeed, the figures were certainly better than those recently released by rival PC maker Dell, which recorded a 51 percent drop in profits, as well as a sales decline, as it competed aggressively against the PC decline by cutting prices.
“They (HP) certainly seem to have stemmed the bleeding,” Chris Bertelsen, chief investment officer at Global Financial Private Capital was quoted by Bloomberg as saying. “If you can’t give me sales and growth, then it’s really hard to continue to engineer profits.”
HP’s share price on the New York Stock Exchange rose 11.4 percent to $23.68 (£15.74) in after market trading, but is currently back down at $21.23 (£14.11). It should be noted that the current price is still down 50 percent from what the stock was trading at three years ago.
Reflecting the sense that the turnaround is working, HP raised its outlook for the year ahead. Earnings excluding some items will be 84 cents to 87 cents a share in the period through July, the firm said, topping analysts’ average estimate for 83 cents, according to data compiled by Bloomberg.
“I am encouraged by our performance in the second quarter, and I feel good about the rest of the year,” added Whitman. “As I have said many times before, this is a multi-year journey. We have a long way to go, but we are on track to deliver on our fiscal 2013 non-GAAP diluted earnings per share outlook.”
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