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 user 2005-08-19 at 8:35:00 am Views: 47
  • #12695

    Tax payments hit HP’s bottom line

    August  2005

    A once-off tax payment of
    USD960 obscured a 40 percent jump in profits at Hewlett-Packard, as the
    company squeezed more from its PC business.

    The California-based technology and imaging giant had revenues of
    US20.8 billion for the three months to the end of July, up 10 percent
    since the corresponding quarter in 2004. Operating profits reached
    USD913 million, up nearly 40 percent.

    But because of a huge once-off tax payment of USD960 million, the
    company had net profits of only USD73 million with per share earnings
    of USD0.03. This compared to USD586 million in profits for the
    corresponding quarter a year earlier, when the company had per share
    earnings of USD0.19.

    The USD960 million tax charge was incurred as a result of the company’s
    decision to send USD14.5 billion of its international earnings back to
    the US, taking advantage of a once-off tax break under the American
    Jobs Creation Act. The repatriation is the biggest yet by an American
    technology firm and follows IBM’s decision to repatriate USD9 billion.

    “We executed well in the third quarter with double-digit revenue
    growth, solid margin improvements in key segments and strong cash
    flow,” said Mark Hurd, HP’s CEO in a statement. “I’m encouraged by what
    we have achieved to date, and we are focused on driving further
    performance improvements.”

    Revenues at Hewlett-Packard’s PC manufacturing operation grew 8 percent
    to USD6.4 billion and the division’s profitability grew seven-fold to
    USD163 million. Profits slipped in the printer division due to more
    aggressive pricing, even as revenues increased 5 percent.

    Meanwhile, revenues grew 20 percent at HP’s server division, where the
    company had profits of USD150 million, reversing a year-on-year loss of
    USD211 million. Revenues in the services group grew 10 percent and in
    the software group, revenues grew 11 percent. However, the software
    division is still running a loss in excess of USD40 million.

    The company said that the first phase of its plan to lay off 14,500
    workers — or 10 percent of its workforce — is coming to an end, with
    the completion of a voluntary redundancy programme in the US. The
    company said that it has initiated discussion with European work
    councils about job cuts in its international operations.

    HP employs 4,000 people in Ireland, 1,800 of whom work in an ink-jet
    manufacturing operation in Leixlip, County Kildare. It also employs
    more than 2,200 people in a software services operation in Dublin and a
    software development operation in Galway. There have been no reports of
    planned job losses in any of HP’s Irish operation