HP's PRINTING BUSINESS STRUGGLES

[Anonymous]

http://www.nytimes.com/2008/08/20/technology/20hewlett.html?bl&ex=1219377600&en=04d1c05c6f53a27f&ei=5087
Hewlett’s Printing Business Struggles
SAN
FRANCISCO — Hewlett-Packard, the world’s largest technology company,
continues to roll along financially — except in one traditional core
business — its printing business.The company reported third-quarter
sales and profit on Tuesday that exceeded Wall Street expectations. But
the company’s struggles in one of its traditional strengths — imaging
and printing — seem to be accelerating.Revenue from its printing
division grew 3 percent, to $7 billion, in the third quarter, which
ended July 31, over the period a year ago. Its commercial printer sales
were down 5 percent, and consumer hardware fell 14 percent. A quarter
of the company’s total revenue comes from its printing division.
Helping to offset the declines was an 11 percent increase in the sales
of printer supplies — like ink and cartridges.On the hardware side,
“you’re starting to see some slower growth in particularly the consumer
business, as well as the commercial business,” an industry analyst with
American Technology Research, Shaw Wu, said.

Mr. Wu said such
slowdowns were the result of cyclical challenges rather than systemic
ones. Hewlett-Packard, having saturated the market with new printers,
will face periods when it must wait until businesses and consumers are
ready to buy again.He said he expected Hewlett-Packard to ramp up soon,
though he noted that the company declined to delve deeply into the
issue during its quarterly conference call. And Mr. Wu said that
although he expected printer sales to rebound, “it’s easier said than
done.”

The decline in printing was among a handful of weak
spots, analysts said, in yet another quarter in which H.P. exceeded
Wall Street projections.In the third quarter, the company reported
revenue of $28 billion, up 10 percent from the same period a year
earlier. Wall Street was expecting $27.4 billion.H.P. reported net
income of $2 billion, up 14 percent from a year ago. Excluding one-time
charges, the company earned 86 cents a share, bettering by 2 cents the
projections of Wall Street analysts.“This is very good, given the
prevailing economic environment,” an analyst with Sanford C. Bernstein
& Company, A. M. Sacconaghi Jr., said.

As has been the case
in recent quarters, H.P. — which does about 68 percent of its sales
overseas — had much stronger growth internationally than it did in the
United States. In its third quarter, H.P.’s sales increased 16 percent,
to $11.2 billion, in Europe, the Middle East and Africa, and 14
percent, to $5.2 billion, in Asia.

But, in one of the other
relatively weak spots in its quarter, Hewlett-Packard’s sales rose only
4 percent, to $11.6 billion, in the American region.The brightest spot
for the company was its personal computer division. Notebook computer
revenue rose 26 percent from the period a year ago, while desktops grew
6 percent. That lower desktop growth is consistent with a broader
slowdown in the sales of desktop computers, which are giving way to
notebooks. Over all, PC revenue grew 15 percent, to $10.3 billion.

Hewlett-Packard
is the world’s largest vendor of PCs. But in the United States, H.P.’s
rival, Dell, has been making an aggressive push into the retail market,
and its market share is growing. Mr. Hurd sidestepped a question about
whether H.P. was feeling pressure from Dell’s entrance into the retail
market.“There’s a ton of folks out there trying to compete on multiple
dimensions,” Mr. Hurd said, referring to other PC makers. “We’re doing
the best to compete.”The other standout was the company’s small — for
H.P. — but fast-growing software division. Revenue was up 29 percent,
to $781 million. Revenue for its Technology Solutions Group, which
sells products and services to large companies and includes software,
grew 10.6 percent, to $10.3 billion.

The challenges could grow
steeper. Later this month, H.P. plans to close its $14 billion
acquisition of Electronic Data Services, a provider of technology
services.The integration of the companies will be a potential bump in
what has been a consistent series of strong quarterly financial
performances, technology industry analysts said.“There are certainly
risks and people are going to pay close attention,” an analyst with
Edward Jones, Bill Kreher, said. He added that he believed the
combination of the companies would be a success.

For his part,
Mr. Hurd said H.P. and E.D.S. collectively had 500 people working on
the integration.“The plan is going well, and we are confident in the
benefits this business combination will bring,” he said. Mr. Hurd said
that he planned to address the opportunities brought by the deal at a
meeting with investors scheduled for Sept. 15.Excluding the financial
impact of the E.D.S. acquisition, H.P. projected earnings for the
fourth quarter — its current one — would be $1.01 to $1.03 a share.
That is up from previous guidance of $1 a share, according to Mr.
Sacconaghi.

[Author]

September 18, 2008 at 3:13 PM