HP CEO pleads patience as earnings fall 44 pct

Feb 22, 2012 By ANICK JESDANUN , AP Technology Writer
This Feb 21, 2012 photo shows a Hewlett Packard logo in Frisco, Texas. Hewlett-Packard Co. will update investors on its progress under CEO Meg Whitman Wednesday afternoon when the world's largest personal computer maker releases its fiscal first-quarter earnings. (AP Photo/LM Otero)

(AP) -- Hewlett-Packard Co. CEO Meg Whitman pleaded for patience Thursday as she described operational challenges and other internal problems that contributed to a decline in earnings at one of the world's largest technology companies.

Even as HP blamed weak consumer demand and supply shortages due to flooding in Thailand for lost revenue opportunities in the latest quarter, Whitman said years of underinvestment in systems and procedures made those problems worse.

She described a company in transition and said HP needed to improve internal procedures and reduce costs to free up money for investments in growing areas. She said HP, which now makes much of its revenue from computers and printers, sees opportunities in security services, information management and Internet-based systems known as cloud computing.

Whitman described her turnaround plan as a "multiyear journey."

"I feel very good that we know the challenges," she said. "We know what we're going to do about them, and we're headed in the right direction."

HP's sales to consumers fared the worst in the November-January period, the first full quarter under Whitman. Revenue from consumer products and services fell 23 percent worldwide from a year earlier.

HP is the world's largest maker of PCs, but it's been performing poorly as buyers in the industrialized world turn their attention to Apple's iPads and Macs. Meanwhile, the company has been unable to properly capitalize on the growing appetite for PCs in emerging markets.

Whitman said HP also had to battle cautious spending by some business customers in the U.S. Worldwide, revenue in the company's commercial businesses fell 4 percent.

The company said it remained guarded about prospects in Europe, although some of the markets elsewhere in the world appear to be stabilizing.

HP earned $1.47 billion, or 73 cents per share, in the fiscal first quarter, down 44 percent from $2.6 billion, or $1.17 a share, a year earlier. Adjusted for one-time items, the company earned 92 cents per share, above the 87 cents expected by analysts surveyed by FactSet.

Revenue was $30 billion, down 7 percent from $32.3 billion and slightly below expectations of $30.7 billion. The revenue drop was even steeper, 8 percent, when taking out the effect of changes in currency exchange rates. It was the fastest revenue decline for the company since the recession hit 2009 results.

HP blamed flooding in Thailand for more than half of its revenue drop. The floods last year disrupted manufacturing of storage drives, a key component in PCs. HP said it decided to divert resources to higher-margin products, but it didn't do as well as it expected because of ongoing operational problems.

"We were not as effective as we needed to be in matching that supply with that demand," Whitman said during a conference call with analysts.

Whitman said the company will focus first on stabilizing its finances and improving its operations. She said the company needs to do better, for instance, at turning orders into products faster than its rivals.

And while she described HP as "world class" in buying components, "I'm not sure I'd say we were world class in terms of how we think end to end about supply chain."

Whitman replaced Leo Apotheker in September after a short and stormy reign. Apotheker announced that HP was looking to jettison its PC unit, which has large volume but small profits. That scared off some buyers, who may not have come back when Whitman decided to keep the division.

For the current quarter, the Palo Alto, Calif., company said it expects earnings of 88 cents to 91 cents per share. Analysts were expecting 95 cents per share.

HP shares fell 37 cents, or 1.2 percent, to $28.60 in extended trading, after the release of the results. Earlier, it fell 41 cents, or 1.4 percent, to close at $28.94.

Results were buoyed by HP's business of providing information technology services to corporations. The company's second-largest division, after PCs, saw a revenue increase of 1 percent from a year ago.

Sales from the printing division, HP's third-largest, were down 7 percent, and its profitability continued to sag. Sales of printers fell faster than ink and toner sales.

Explore further: EU Parliament votes to break up Google

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Hewlett-Packard reports higher 3Q earnings

Aug 19, 2011

(AP) -- Hewlett-Packard Co. reported an increase in its third-quarter net income on Thursday, but the technology company gave a lower-than-expected outlook for the current quarter and cut its outlook for ...

CenturyLink 3Q net income falls as expenses rise

Nov 02, 2011

(AP) -- Phone company CenturyLink Inc. says its third-quarter net income fell as rising operating expenses related to its April acquisition of larger phone company Qwest overshadowed increased revenue.

HP profit drops 17 pct; PC, ink sales stumble

May 19, 2009

(AP) -- Hewlett-Packard Co.'s quarterly profit dropped 17 percent on lighter sales of personal computers and printer ink, two of its biggest sellers and a sign that the woes in consumer technology spending dragged on beyond ...

Qualcomm 3Q results beat Wall Street estimates

Jul 20, 2011

(AP) -- Wireless chip-maker Qualcomm Inc.'s results for the latest quarter beat Wall Street's expectations, and its projections for the current quarter are also above analysts' estimates.

Recommended for you

EU Parliament votes to break up Google

Nov 27, 2014

The European Parliament voted overwhelmingly for the break-up of Google Thursday in a largely symbolic vote that nevertheless cast another blow in the four-year standoff between Brussels and the US Internet ...

Toyota finds new air bag issue, recalls more cars

Nov 27, 2014

Toyota Motor Corp. recalled more than 40,000 vehicles in Japan on Thursday as part of a worldwide scare over defective air bags and is investigating a new type of air bag problem that could lead to further recalls.

Netflix sues Yahoo CIO for alleged kickbacks

Nov 26, 2014

Netflix is suing a former company vice president who is now chief information officer at Yahoo, accusing him of receiving money from vendors he hired to work with the video streaming company.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.