Hewlett-Packard Co’s (HP) quarterly profit dropped 17 percent on lighter sales in two key areas, personal computers and printer ink, in 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 percent of HP’s 321,000-employee work force, will lose their jobs over the next year. The cuts will be on top of the 24,600 jobs HP was already dumping as part of its acquisition of Electronic Data Systems, a technology services provider HP bought for US$13.9 billion last year to mount a bigger challenge to IBM Corp.
The new cuts will come from HP’s product businesses. HP, whose products include PCs, printers, computer servers, ink and toner cartridges, did not provide more details.
HP’s results, reported on Tuesday after the market closed, muddies the picture of whether technology spending has fallen as far as it’s going to in this recession. HP’s outlook was not optimistic and its shares fell in extended trading.
HP chief financial officer Cathie Lesjak said in an interview that it’s still “too tough to call” whether PC sales have hit a bottom.
That differs from what one of HP’s major suppliers, Intel Corp, said last month.
Intel 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, while 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 on April 30, so its analysis is based on later information than Intel had.
Palo Alto, California-based HP said it earned US$1.72 billion, or US$0.70 per share. Excluding restructuring and other one-time charges, HP earned US$0.86 per share. HP said it beat Wall Street’s forecast because it included US$0.02 per share of charges related to a patent dispute that analysts didn’t factor into their estimates.
Sales fell 3 percent to US$27.4 billion, which matched analyst estimates. HP says sales would have been up 3 percent were it not for currency fluctuations.
HP said PC shipments stayed flat year-over-year, but revenue from those machines fell. The recession has caused retailers to slash prices on PCs to lure customers into the stores, which is one explanation for how HP can make less money on roughly the same number of machines. The growing popularity of mini-laptops called “netbooks” — which are cheaper and carry lower profit margins than regular laptops — also skews the numbers.
Laptop revenue fell 13 percent to US$4.7 billion. Desktop computer sales were down 24 percent to US$3 billion. HP said some areas improved, particularly China and consumer sales in the US.
In HP’s printer and printer-ink division, overall sales were down 23 percent to US$5.9 billion, while the division for enterprise storage and servers saw its sales fall 28 percent to US$3.5 billion.
Because of the Electronic Data Systems acquisition, services are now the biggest part of HP’s business. Nearly a third of HP’s overall revenue came from services in the latest period. HP had US$8.5 billion in services revenue.
HP kept its profit forecast at US$3.76 to US$3.88 per 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 percent to 5 percent, HP narrowed that range on Tuesday to 4 percent to 5 percent.
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