Economy Hits HP Where It Hurts
Along with IBM, Cisco Systems and every other major IT infrastructure company, Hewlett-Packard has been trying to weather the recession with its core businesses intact. As HP's first-quarter 2009 earnings call demonstrates, the gloomy economy and softening in IT spending has had an impact on the world's largest PC vendor.Hewlett-Packard announced earnings for the first quarter of 2009 that show the effects of a moribund economy on the world's largest PC vendor.
While net revenue grew 1 percent year over year, to $28.8 billion, it was a far cry from the double-digit growth that marked previous quarters. Declines hit in several areas, including the Personal Systems Group-down 19 percent overall, with laptop revenue for the quarter down 13 percent-and HP Software, which was down 7 percent for the quarter. "We executed well in a challenging environment," Mark Hurd, chairman and CEO of HP, said during the earnings call on Feb. 18, citing the company's streamlined cost structure and market-share gains in key segments.
Referring to the company's recent restructuring, including the layoffs of 24,700 employees in the wake of its Electronic Data Systems acquisition, Hurd added, "We have more flexibility to be more competitive. In addition, we have not cut into our muscle."
By contrast, in the fourth quarter of 2008, HP's revenue and earnings beat Wall Street expectations despite a global economy in the midst of meltdown. The company had earned $33.6 billion, an increase of 19 percent year over year.
At that time, the company estimated its revenue in the first quarter of 2009 at somewhere between $32 billion and $32.5 billion; Wall Street estimates called for earnings of 93 cents per share, or $33.72 billion in revenue.
Despite the gloomy numbers, some analysts see HP's overall position as fundamentally strong.