September 26, 2023

H.P. Profit Up 5%, but PC Sales Are Declining

SAN FRANCISCO — Hewlett-Packard reported Tuesday that sluggish sales of personal computers muted its earnings and it predicted that future growth would be dampened.

The company reported net income in the second quarter that ended April 30 rose 5 percent to $2.3 billion, or $1.05 cents a share, from $2.2 billion, or 91 cents, in the year-ago quarter.

The company said revenue climbed 3 percent, to $31.6 billion

The adjusted income of $1.24 a share was slightly above the expectations of Wall Street analysts. They had expected $1.21 a share and revenue of $31.54 billion, according to a survey of analysts by Thomson Reuters.

But the company also revised its forecast for the current quarter, indicating worries about the impact of the Japan earthquake, continued softness in sales of personal computers and lower operating profits in its services unit.

Revenue during the current quarter is expected to be around $31.1 billion to $31.3 billion, slightly below analyst expectations of $31.8 billion. Adjusted income is expected to be around $1.08 per share, which was also below the $1.24 that had been predicted.

Full-year revenue is expected to be $129 billion to $130 billion with adjusted income of at least $5 per share, also below analyst predictions. 

The company, based in Palo Alto, Calif., said that sales of personal computers fell 5 percent to $9.4 billion. Revenue for the unit that includes printers rose 5 percent to $6.7 billion.

Meanwhile, H.P.’s services business, which caters to corporate clients, gained 2 percent to $9 billion. Storage and servers increased 15 percent to $5.6 billion.

H.P. reported earnings a day earlier than originally planned after an internal memo from its chief executive, Léo Apotheker, warning of “another tough quarter” leaked to the press. His comments immediately cast doubt about the company’s growth and sent its shares spiraling.

They fell 4.5 percent to $38 in after-hours trading on Monday.

The memo, first reported by Bloomberg News, also alluded to potential layoffs and other cost-cutting measures.

Nevertheless, Mr. Apotheker said in a news release Tuesday that, “H.P. executed well and delivered a solid quarter.” He also said: “Our enterprise strategy, with services at its core, is focused on higher value-added solutions. Today we are accelerating our efforts to align our services business model to our long-term strategy to deliver unprecedented value to our customers and a better return for our shareholders.”

Companies like H.P. that make personal computers are vulnerable to changes in consumer spending because of the economy. Moreover, shoppers are increasingly buying tablet computers, a market in which Hewlett-Packard is bit player to Apple’s iPad. The company has said it expects to sell a tablet computer this summer.

In March, Mr. Apotheker outlined a plan to grow H.P.’s tiny corporate software business and expand into the cloud — a term used to describe products and services delivered online. However, that strategy, which puts the company on a collision course with I.B.M and Oracle, will take some time to get rolling.

Software sales grew 17 percent to $764 million in the quarter.

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