News Column

HP reports a surprise gain as PC sales surge

August 22, 2014

Bloomberg News



New York:Hewlett-Packard (HP) Chief Executive Officer Meg Whitman is benefiting from a surge in personal-computer sales. Now she needs to show she can make progress in other businesses, including software and services.



The Palo Alto, California-based technology provider on Thursday posted its first sales growth in 12 quarters, with revenue rising 1.3 per cent to $27.6 billion for the fiscal third quarter ended July 31. Profit excluding certain items was 89 cents. Analysts on average were estimating profit of 89 cents a share and sales of $27 billion, according to data compiled by Bloomberg.



Yet even as Hewlett-Packard's personal-computing business experienced a 12 per cent revenue jump for the quarter, sales across the company's other divisions including services, printers and software either declined or clocked in at less than two per cent growth.



The uneven results illustrate the challenges Whitman still faces in turning around the technology giant, even after moving to rev up growth with new products and cutting jobs to trim costs since she took over as CEO in September 2011.



"The company is in this longer-term shift toward services and software, and neither of those divisions grew," said Bill Kreher, an analyst at Edward Jones, who has a hold rating on the stock. "This isn't necessarily consistent with the long-term plan."



Turnaround strength

In a conference call, Whitman said Hewlett-Packard has become a stronger company because it has been forged in "the adversity of the turnaround." She acknowledged there are some declining and flat businesses, and said there are opportunities for growth, especially in PCs where "we believe we can continue to gain share."



Hewlett-Packard's stock rose 5.4 per cent to $37 at the close in New York, putting the shares at their highest level since July 2011. The stock is up 32 per cent this year.



Whitman has stabilised Hewlett-Packard and returned the company to profit over her tenure. She has focused on reducing costs and introducing new products like water-cooled servers and 3-D printers. Whitman, who was recently named chairman after activist investor Ralph Whitworth stepped down for health reasons, in May said she was paring as many as 16,000 more employees, on top of 34,000 already announced.



Sustained sales growth remains elusive. Hewlett-Packard competes with EMC Corp., Oracle, Dell and others, all of which are facing young competitors that are fielding cheaper and simpler technologies. One of Silicon Valley's oldest companies, Hewlett-Packard's product range spans PCs to home printers to software, yet the company has fallen behind in mobile computing at a time when consumers have migrated to smartphones and tablets made by Apple and Samsung Electronics.



Net income


Net income for the quarter fell 29 per cent to $985 million, or 52 cents a share, compared with $1.39 billion, or 71 cents, a year earlier. The company took a $649 million restructuring charge in the quarter. For the current quarter, Hewlett-Packard projected profit excluding items of $1.03 to $1.07, in line with analysts' average estimate of $1.05, according to data compiled by Bloomberg.



Corporate spending on PCs has also helped lift the results of other technology companies recently. Intel last month forecast revenue that exceeded analysts' estimates for the current quarter, while Microsoft said it's seeing signs of improvement in the PC market. Worldwide PC shipments slipped less than projected in the second quarter as businesses replaced older computers, researcher IDC said in July.


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Source: Times of Oman


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