HP Profit Meets Estimate; Revenue Misses; To Cut Up To 16K More Jobs

(RTTNews) - Computer and printer maker Hewlett-Packard Co. (HPQ) said Thursday after the markets closed that its second quarter profit rose 18% from last year, as better cost control helped offset a slight decline in revenue.

The company's quarterly earnings per share, excluding items, came in line with analysts' expectations, but its quarterly revenue fell short of analysts' forecast. The company also gave a slightly downbeat earnings outlook for the current quarter.

"With the first half of our fiscal year completed, I'm pleased to report that HP's turnaround remains on track," said Meg Whitman, president and chief executive officer, HP. "With each passing quarter, HP is improving its systems, structures and core go-to-market capabilities. We're gradually shaping HP into a more nimble, lower-cost, more customer- and partner-centric company that can successfully compete across a rapidly changing IT landscape."

HP also said that it will eliminate 11,000 to 16,000 more jobs than the previously estimated 34,000 announced in connection with a multi-year restructuring plan adopted by the company in May 2012.

Whitman, who was appointed HP CEO in September 2011, has been making sweeping organizational changes for the past nearly one and half years in a bid to make HP a leaner and meaner company.

HP shares are currently losing 1.83% in after hours trading after closing the day's regular trading session at $31.78, down 74 cents or 2.28%. The shares trade in a 52-week range of $20.25 to $33.90. The quarterly results were unexpectedly released early before the markets closed.

HP's Personal Systems revenue for the second quarter rose 7% year-over-year to $8.2 billion. For the quarter, both notebook unit sales and Desktop unit sales were up 6%. In August 2012, HP announced strategic alternatives for this business, but later decided to keep it following a review.

HP performed well in this segment despite the weakness in the PC market. Last month, market research firm Gartner, Inc. (IT) said worldwide PC shipments fell 1.7% year-over-year to 76.6 million units in the first quarter of 2014. This marks the eighth consecutive quarter of shipment decline, but less severe than the past seven quarters.

HP lost the world PC lead to China's Lenovo Group Ltd. during the second quarter of 2013. HP and Lenovo had been virtually neck and neck for the top global position in the PC market throughout 2013, but Lenovo ended the year as the world's top PC vendor.

Second quarter Printing revenue fell 4% from a year earlier to $5.8 billion. Revenue for the company's Enterprise Group declined 2% to $6.7 billion in the second quarter. Enterprise Services revenue for the quarter dropped 7% to $5.7 billion. HP's software revenue for the quarter grew to $971 million from $967 million last year, while HP Financial Services revenue slipped 2% to $867 million.

For the second quarter ended April 30, 2014, the Palo, Alto, California-based company reported net income of $1.3 billion or $0.66 per share, compared to $1.1 billion or $0.55 per share for the year-ago quarter.

Excluding items, adjusted net income for the second quarter was $1.7 billion or $0.88 per share, compared to $1.7 billion or $0.87 per share in the prior year quarter.

On average, 29 analysts polled by Thomson Reuters expected the company to earn $0.88 per share for the second quarter. Analysts' estimates typically exclude special items.

Net revenue for the second quarter fell 1% to $27.31 billion from $27.58 billion in the same quarter last year. Twenty-six analysts had a consensus revenue estimate of $27.41 billion for the second quarter.

Operating margin for the quarter improved to 6.7% from 5.8% a year earlier. Adjusted operating margin for the quarter remained flat with last year at 8.6%.

During the second quarter, HP repurchased about 26.7 million shares of its common stock for $831 million and ended the quarter with $15.4 billion in gross cash.

Looking forward to the third quarter, HP forecasts earnings of $0.59 to $0.63 per share and adjusted earnings of $0.86 to $0.90 per share.

For the fiscal year 2014, the company now forecasts earnings of $2.68 to $2.80 per share and adjusted earnings of $3.63 to $3.75 per share. Previously, the company forecast earnings of $2.85 to $3.00 per share and adjusted earnings of $3.60 to $3.75 per share.

Analysts currently expect the company to earn $0.89 per share for the second quarter and $3.71 per share for the fiscal year 2014.