HP's Final Earnings Report as One HP Not Exactly Encouraging

Despite plenty of black ink overall, pressure from competitors continues to build on both HP spinoffs, HP Enterprise and HP Inc.

Hewlett-Packard Co., founded at the dawn of World War II and serving as a publicly held company from January 1978 until Oct. 31, 2015, rode a quiet trail into the sunset Nov. 24. Its two surviving descendants, HP Enterprise and HP Inc., born Nov. 1, will carry on the Bill Hewitt-David Packard business in smaller forms and in different markets from now on.

It wasn't one of the venerable company's better earnings report days. The all-purpose IT hardware and software maker, survivor of so many product wars with companies such as IBM, Oracle, Dell, EMC and many others, publicly announced its final quarterly earnings report as a single corporation, and it had to show another drop in revenue for most of its businesses.

HP is a profitable company, don't misunderstand. Any company that reports $1.32 billion in profit on sales of $25.71 billion over a span of three months -- which it did Nov. 24 -- is doing most things correctly. Net income was essentially flat from a year earlier, thanks to cost cutting across the board and numerous layoffs. The main worry -- overall revenue -- dropped an alarming 9.5 percent. The combined company has reported revenue declines in 16 of the past 17 quarters.

Shares in HP Enterprise rose about 3 percent in after-hours trading after closing at $13.69.

Pressure from competitors continues to build on both HP spinoffs. Revenue for both in the fiscal fourth quarter was down year-over-year, and profits were at the low end of analysts' estimates.

HP's results in the quarter exposed many of the continuing challenges the newly separated companies are facing. Bright spots for HPE Nov. 24 were increases in sales of its x86 Industry Standard Servers (5 percent, down from 8 percent last quarter) and networking equipment (35 percent); revenue from higher-end servers, software and technical services was down slightly.

HPE is banking on growth in the latter divisions -- especially on the software side -- so some things need to happen there soon for the company to turn around its fortunes.

The Nov. 24 report was not good for HP Inc., which handles PCs and printers. Both product lines were down a substantial 14 percent in sales from a year earlier. HP Inc. stock fell in value more than 5 percent in extended trading after the report came out, after closing earlier at $14.64.

"We grew operating profit margins across all of our major business segments, increased investment in innovation, and executed well across key areas of our portfolio and in our separation activities," summarized CEO Meg Whitman in the report.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...