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 user 2005-02-24 at 9:44:00 am Views: 36
  • #10503
    Hewlett-Packard posts flat quarterly earnings
    ‘There is work to be done,’ says interim

    SAN JOSE, Calif. –
    A week after firing its top executive, Hewlett-Packard Co. reported quarterly
    earnings that were essentially flat, and its interim chief executive
    acknowledged, “There is work to be done.”

    For the three
    months ended Jan. 31, H-P reported a profit of $943 million, or 32 cents per
    share, only 0.7 percent higher than the $936 million, or 30 cents per share, it
    earned in the first fiscal quarter of 2004.

    Excluding special
    items, including at least $115 million to settle patent litigation with
    Intergraph Corp., H-P would have earned 37 cents per share, compared with 35
    cents per share in the same period a year earlier.

    Quarterly revenue
    was a record $21.5 billion, up 10 percent from $19.5 billion in the same quarter
    a year ago. But when adjusted for currency fluctuations around the world,
    revenue increased only 5 percent from a year ago, said interim CEO Robert

    H-P’s quarterly
    performance beat expectations of analysts polled by Thomson First Call, who
    forecast Palo Alto, Calif.-based H-P would earn 34 cents per share on sales of
    nearly $21 billion.

    H-P shares closed
    Wednesday at $21.06, down 6 cents on the New York Stock Exchange. In extended
    trading, the shares gained 72 cents, or 3.4 percent, after the report was

    earnings came one week after H-P’s board ousted Chairman and Chief Executive
    Carly Fiorina for failing to slash costs and boost sales quickly

    In recent months,
    Fiorina — one of the country’s most powerful women executives — became the
    target of intensifying criticism for her ambitious diversification strategy.
    Through the 2002 acquisition of Compaq Computer Corp., she attempted to change
    H-P from a marginal company that focused on printers and ink into a Silicon
    Valley consulting and computing powerhouse.

    Despite her
    efforts, ink and printers continue to drive revenue. The “imaging” division
    reported first-quarter sales of $12.9 billion, up 7 percent from the same period
    of 2004.

    Given the sharply
    declining profit margins of printers and other low-end hardware, some Wall
    Street analysts have been suggesting shareholders might be better off if H-P
    were split into two or more pieces.

    Most analysts
    polled Wednesday by Thomson First Call continued to rate H-P stock a “hold,” and
    share performance lags that of H-P’s fiercest rivals: Dell Inc., one of the
    world’s most efficient retailers, and IBM Corp., the leader in technology
    consulting services — a lucrative niche H-P is trying to penetrate.

    Analysts said they
    remain skeptical about H-P’s prospects, regardless of the next CEO. The company
    is in a similar position to beleaguered retailer Kmart Holding Corp., whose
    profits are squeezed between high-end discounter Target Corp. and Wal-Mart
    Stores Inc., a model of retail efficiency.

    “The strategy that
    H-P was running with Carly was trying to drive margins up in every business
    group, and that strategy has clearly failed,” said Martin Reynolds, vice
    president of technology research firm Gartner Inc. “The board needs to move on
    and come up with something other than a horizontal strategy.”

    Wayman, who is also
    H-P’s chief financial officer, would not discuss succession — only quarterly
    results, which he called “solid.” He was particularly pleased with a record $3.8
    billion in revenue from consulting contracts, an increase of 20 percent from the
    same quarter a year ago.

    But he acknowledged
    that the company was under pressure to perform better. He said revenue for the
    upcoming quarter, which ends in April, would be at least $21.2 billion, similar
    to Wall Street’s expectations.

    He also said the
    company would continue to slash expenses — possibly escalating a cost-cutting
    campaign that earned Fiorina the moniker “Chainsaw Carly” throughout Silicon

    The company reduced
    research and development costs to $878 million in the first quarter from $889
    million in the same quarter of 2004 — a risky move for any company in the
    fiercely competitive technology sector. “General and administrative” costs —
    which include expenses such as legal fees and consultants — swelled to $2.7
    billion, up from $2.58 billion in the same period last year.

    Wayman wouldn’t say
    how many people would be laid off this year at H-P, which ended 2004 with
    roughly 150,000 employees. But the company spent roughly $60 million in the
    fiscal first quarter on work force reduction plans, and it plans to spend as
    much as $140 million more in the current quarter.

    “While we continue
    to make progress in growing our top line, there is work to be done to improve
    our profitability,” Wayman said. “As the board conducts a CEO search, our
    management team is focused on driving improved execution to serve our customers,
    strengthen our competitiveness and improve shareholder

    Better than expected Q1 at HP

    February 2005 – Palo Alto (CA):
    Hewlett-Packard has reported higher-than-expected revenue for its Q1 combined
    with a positive sales outlook, just one week after the departure of its CEO
    Carly Fiorina.

    The company posted a net income of $943 million, or EPS
    of $0.32, up less than 1 per cent from $936 million, or EPS of $0.30 a year ago.

    Revenue increased by 10 per cent to $21.5 billion, ahead of Wall Street
    estimates of $20.9 billion.

    Particularly notable was the company’s
    improved profitability in its PC business, reflecting the its recent decision to
    up profitability in the sector rather than market share. Sales rose 11 per cent
    to $6.9 billion.

    CFO Bob Wayman said: “While we continue to make
    progress in growing our top line, there is work to so to improve our

    Toni Sacconaghi, an analyst at Sanford Bernstein &
    Co told The Wall Street Journal he believed the results were “mostly
    positive”. “Fear of HP throwing in the towel or of losing material business will
    be mitigated,” he added.

    The company has disclosed little information on
    its search for a new CEO.