HP sales, profits continue to fall

Hewlett-Packard Co. reported today that its sales and profits continued to decline in the fourth quarter, although its earnings exceeded analysts' estimates.

The company's net profit for the quarter ended Oct. 31 was US$97 million, or 5 cents per share. That compared with $922 million, or 47 cents per share, for the fourth quarter of last year, the company said in a statement.

Net revenue fell to $10.9 billion in the fourth quarter, down 18 percent from $13.3 billion in the fourth quarter of last year, HP said.

The fourth-quarter financial figures translate into earnings of 19 cents per share on a pro forma basis, HP said, down from 41 cents per share last year. In a consensus estimate, analysts polled by Boston-based First Call/Thomson Financial Inc. had predicted HP would pull in earnings of 8 cents per share for the period.

"Results were driven by excellent execution in imaging and printing and good performance in services. While overall computing systems results remain weak, we saw improvement in certain segments, including storage and PCs," said Carly Fiorina, HP's chairwoman, CEO and president, in a telephone conference call.

Despite opposition from the Hewlett and Packard families, Fiorina reaffirmed HP's commitment to its $22 billion acquisition of Compaq Computer Corp.

In the statement, Fiorina said the Compaq transaction was a unique opportunity to move HP into the future and benefit shareholders, customers and employees.

"We expect this transaction to create substantial earnings accretion soon after the merger closes," she said. "With Compaq's customer base and complementary products and services, we will materially strengthen key HP businesses."

Fiorina directly addressed the recent and highly public opposition to the merger from the families of the late HP co-founders.

"Despite the actions by some individuals, it is far too early for speculation that this merger will not occur," she said. "It is important to remember that the approval of the merger is a process, and we're not even halfway through [that process]."

Though David Packard Jr., son of HP's other co-founder, said he intends to join the Hewlett family in opposing the merger, he doesn't speak for The David and Lucille Packard Foundation, which is HP's largest stakeholder with an ownership share of more than 10 percent and which has yet to take a stance on the merger.

"Though the Packard Foundation can comment for themselves, it has engaged itself in quite a deliberate fashion. We have met with them and with other investors, and we will continue to meet with them. I would guess that they will announce a decision sometime in December or January," Fiorina said.

"The barrage of media attention [about the Hewlett family's opposition] has been a distraction to [employees]. As for our customers, they are more concerned with the things that effect them every day, and those are the fundamentals," Fiorina said.

Laurie McCabe, an analyst at Summit Strategies Inc. in Boston, said what concerns her the most about the earnings report is the drop in HP's computing systems business.

"This is a tough economy for a lot of businesses, and HP is no exception," McCabe said. "But they had a pretty large drop: 31 percent in their infrastructure systems -- PC's, notebooks, servers, mobile devices and software. And that has to be disappointing to them."

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