Hewlett-Packard's Profit Falls As Desktop PC Sales Fall--2nd Update

By Tess Stynes 

Hewlett-Packard Co. said its earnings for the January quarter fell 4.1% as sales of desktop computers declined sharply from a year ago and the company's revenue growth slowed across its different segments.

Shares fell 5.5% to $36.36 in recent after-hours trading as revenue missed expectations and the company detailed the future impact from recent currency fluctuations.

For the year ending in October, H-P lowered its per-share earnings estimate by 30 cents a share to reflect the negative impact from foreign exchange. The company now expects a per-share profit, excluding certain items, of $3.53 to $3.73.

For current quarter ending in April, the company forecast per-share earnings excluding certain items of 84 cents to 88 cents, while analysts polled by Thomson Reuters expected a per-share profit of 96 cents. H-P said its outlook includes a negative impact from currency of nine cents a share.

"While we were able to manage the impact of currency in the quarter and deliver earnings as expected, we believe the impact on [our full-year earnings] will be significantly greater than we anticipated in November, " Chief Executive Meg Whitman said. "We'll work hard to offset these impacts through repricing and productivity, but fully mitigating currency movements of this size would require reducing investments and mortgaging our future. We won't do that."

"With the first quarter of fiscal 2015 now behind us, the H-P turnaround remains on track," Ms. Whitman said.

Hewlett-Packard in October unveiled plans to separate its personal-computer and printer businesses from its corporate hardware and services operations, which has been billed as the growth engine. The company is expected to provide further details about the planned separation during its conference call.

The recent wave of breakups and spinoffs at technology companies and in the wider corporate world has been fueled by the idea that companies with a narrower focus perform better.

What will be called Hewlett-Packard Enterprise--a collection of products and services, including hardware, software, and consulting, marketed to corporate customers--saw revenue decline 6.7% in the latest quarter to $13.66 billion.

The company's personal computers and printers business, which will form the second company, dubbed HP Inc., reported revenue dropped 1.8% to $14.09 billion. Sales of desktop units fell 7% in the quarter.

H-P also has been undergoing a multiyear restructuring in an effort to stem sales declines. The company has laid off tens of thousands of employees and cut other costs to support its bottom line.

For the fiscal first quarter ended Jan. 31, H-P reported a profit of $1.37 billion, or 73 cents a share, down from $1.43 billion, or 74 cents a share, a year earlier. Excluding restructuring charges, separation costs, acquisition-related charges and other items, per-share earnings rose to 92 cents from 90 cents. The company guided for 89 cents to 93 cents a share.

Revenue decreased 5% to $26.84 billion, below analysts' estimates of $27.34 billion. Excluding currency impacts, sales declined 2%.

Write to Tess Stynes at [e-mail]

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