HP Releases First Earnings Reflecting Merger

Sales continue to slump, but the PC maker met its earlier projections.

Sales continue to slump at Hewlett-Packard Co., which Tuesday released its first earnings to reflect the acquisition of Compaq Computer Corp. in May, underscoring rival companies assertions that the giant computer maker is losing customers.

For the quarter, HP, based in Palo Alto, Calif., recorded revenues of $16.5 billion, down 9 percent from the $18.2 billion the combined companies posted a year ago, and 9 percent short of the totals the two companies posted a quarter earlier.

The worlds largest PC maker posted a net loss of 67 cents per share due to nearly $3 billion in one-time charges, of which $1.6 billion was related to costs tied to its buyout of Houston-based Compaq.

Excluding charges, HP posted earnings of 14 cents a share, compared to 11 cents per share a year earlier, figures which were in line with the companys earlier predictions, a point Chairman Carly Fiorina said underscored the acquisition has proceeded as planned.

"Throughout our first 100 days, weve kept our eye on the ball," Fiorina said in a statement. "Were hitting all our integration milestones and are on track to meet our second-half targets."

The chief executive also sought to counter remarks by competitors, such as Dell Computer Corp. and IBM, contending that customers have been fleeing HP since its buyout of Compaq.

"The top 50 contracts we won in the quarter totaled $2 billion in new long-term revenue, and we exit the quarter with almost $12 billion in cash and equivalent," Fiorina said. "While we have more work ahead, given the tough economy and a major integration, weve accomplished a great deal."

The computer maker also pointed out that its on schedule to meet targets it touted during the long proxy fight to secure necessary shareholder support to complete the deal, valued at about $19 billion.

Specifically, HP said:

  • It was on track to achieve operating savings of $500 million this year, 2.5 billion next year and $3 billion in 2004;
  • It reduced its work force by nearly 4,740 employees and expected to meet its planned cuts of 10,000 by November;
  • It had reduced its total office and facilities space by 2 percent during the quarter and was on track to eliminate 19 percent by 2004.