HP hit hard by slowed consumer spending

Hewlett-Packard met its own lowered expectations for its second quarter in what continues to be a tough economic climate for the company, HP announced Wednesday.

HP posted revenue of US$11.6 billion for the quarter, ended April 30. This total compares to $12 billion in revenue for the same period last year, a 4 percent drop. Pro forma earnings per share for the vendor were $0.18, including $155 million in extraordinary inventory and capacity write-downs in the consumer business.

Analysts polled by Thomson Financial/First Call lowered their earnings forecast for HP on Tuesday, predicting the vendor would pull in $0.15 per share.

HP's pro forma net earnings were $356 million for the period, compared with $887 million or 43 cents per share in the second quarter of 2000.

Net earnings for the quarter were $319 million, compared with $935 million in last year's second quarter. Diluted net earnings per share were $0.16, compared with $0.45 in last year's second quarter.

"Our results continue to be impacted by significant macro-economic challenges and particular weakness in consumer and capital spending in the U.S. and Europe,'' said Carly Fiorina, HP's chairman, president and chief executive officer, in statement.

Revenue for the company's consumer business declined 8 percent in the quarter, as slowed consumer spending hurt the PC and peripherals market.

Revenue for the company's computing systems segment, which includes server, storage, software and PC products, declined 7 percent year-over-year and fell 5 percent compared to the immediately preceding quarter. The high-end Unix operating system-based servers were hit particularly hard, dropping 13 percent in revenue compared to the same quarter last year.

HP warned in April that it expected a revenue decline of 2 percent to 4 percent and earnings between $0.13 and $0.17 cents per share for its second quarter. The company said it would eliminate up to 3,000 management positions, as a result of the earnings shortfall, and would require employees to take mandatory days off, at the time.

HP also sold its troubled VeriFone e-payment division last week to Los Angeles-based Gores Technology Group (GTG), shedding what was a costly endeavor for the company.

HP incurred a loss of US$40 million in its fiscal 2000 fourth quarter as a result of its purchase of VeriFone, the company said at the time. Company officials admitted at the time that VeriFone's purchase had been problematic but said the bad times appeared to have passed. HP discussed using VeriFone technology to turn handheld computers and mobile phones into devices that can be used for shopping. [Shares of Hewlett-Packard (HWP) closed Wednesday up just over 5 percent to $26.75 per share on moderate trading.

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