HP Struggles to Meet Street Projections, Revenue and Profit Slips

By Chris Preimesberger  |  Posted 2012-08-22 Print this article Print

Storage, networking, printers and high-end server sales are the bright spots; the company is still trying to turn around personal systems and service divisions.

Hewlett-Packard, which has always put a heavy emphasis on selling servers, personal computers, printers and other IT hardware as competitors have moved away from those items, continues to feel the pressure for maintaining this strategy.

Whether that pressure lessens or increases in the next few quarters is something only time will tell, but at the moment those businesses and HP's enterprise services division are the two top turnaround targets for CEO Meg Whitman and CFO Cathie Lesjack.

The huge IT company Aug. 22 reported that its earnings and sales continued to falter in Q3 2012 as the company just did meet Wall Street's projections. HP's profit was $2 billion ($1 per share), which amounted to a 9 percent drop from the same period a year ago. Revenue fell 5 percent year-over-year to $29.7 billion.

However, these numbers were predicated on a $9.2 billion write-down on its enterprise services business. This was largely the result of a previously announced $8 billion write-down for the 2008 acquisition of Texas-based services firm Electronic Data Systems Corp. and separate restructuring charges.

Including the $9.2 billion charge, HP's quarter represented the biggest loss in the company's 73-year history.

Minus the charge, the company's results were pretty much on target for investment community expectations. Analysts queried by Thomson Reuters expected the company to earn 98 cents per share on sales of $30.1 billion.

Storage Is a Champion

Storage, in the form of the 3PAR with its StoreOnce product line, was the biggest winner in the HP sales lineup, with sales up 60 percent year over year. The company's enterprise networking switches and routers also reported growth with a 10 percent sales improvement over Q3 2011.

HP didn't give specific numbers on revenue for its new cloud software and services lineup, but Whitman said that the HP Cloud System recently signed its 750th customer and is making strong inroads in the airlines vertical.

The Personal Systems Group, comprised mostly of the former Compaq franchise, made $8.6 billion but was down $972 million from a year ago. Enterprise Services, which is largely what once was EDS, brought in $8.7 billion but lost $276 million year over year.

IPG, HP's printing franchise, held steady at $6 billion in revenue.

The Palo Alto, Calif.-based company, which is still the world's No. 1 PC maker ahead of Lenovo and Dell, also said that it has cut its earnings outlook for the full fiscal year to a range of $4.05 to $4.07 per share.

HP 'Under Attack'

"We are under attack from several sides," Whitman said on the conference call, "with macroeconomic headwinds and some very aggressive pricing from competitors in personal systems. But we are going to fight and defend our No. 1 market position with a new lineup of PCs and a Windows 8 tablet for enterprises that we will be introducing soon."

HP's stock was both up and down Aug. 22. Shares jumped 4 percent in after-hours trading, slipped back about 1 percent, and then turned back up 1.4 at around 1:30 p.m. PT. It was selling at $19.20 at 3 p.m. PT.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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