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AnonymousInactivehttp://online.wsj.com/article/SB124268723815832163.html
Latest Economic Signal: H-P Toner Error
The
worst might be over for personal-computer sales. But for technology
bellwether Hewlett-Packard, the printing division could still look ugly
when the Palo Alto, Calif., company reports fiscal second-quarter
earnings Tuesday afternoon. Such a trend could continue to pinch H-P
for a few more quarters.Analysts anticipate a profit of 86 cents a
share, about a penny lighter than a year earlier. With its global span
and products that touch consumers and businesses alike, H-P’s results
and management’s comments about them will be a meaningful read on the
broader economy.Though there are signs the PC market has stabilized,
worries persist that H-P’s printing business, which generates roughly a
third of the company’s profit, continues to struggle. That is an
indication that even as the economy is trying to pull itself up,
consumers and corporate purchasing managers continue to keep their
pocketbooks mostly closed.H-P typically sells its printers at a loss,
making up the difference with high-profit-margin ink that consumers
must continually buy. For that reason, Wall Street has looked at ink as
a buffer that provides a stable income stream for H-P in lean times.
Printing-segment revenue had risen at high single-digit rates for
years.Alas, no more.Amid massive U.S. job losses, business
bankruptcies and other misery, H-P’s so-called consumable sales plunged
7.2% in the fiscal first quarter, one reason H-P missed Wall Street’s
revenue estimates by $3 billion, or 10%.Going into Tuesday’s
second-quarter report, U.S. unemployment keeps rising, while businesses
keep cutting costs. The upshot: Businesses will likely print less and
consumers “won’t be printing an album of photos with expensive color
ink at home,” says Bill Shope, a Credit Suisse Group analyst. “If the
printing business continues to deteriorate, it will be difficult for
H-P to hit their targets this year.”Brian Alexander, an analyst
at Raymond James & Associates, estimates sales declines in H-P’s
consumable business “will accelerate this quarter — it could be down
in the low- to midteens — and will probably stay negative the rest of
the year.”There is a “very tight correlation,” he says, between
consumables and macroeconomic indicators such as employment and
information-technology spending. “If more people are employed and
there’s economic growth, there are more supplies bought.”And vice
versa.
ttp://online.wsj.com/article/BT-CO-20090514-714248.html
H-P Expected To Weather Storm Despite Sales Drop
“Our
improved expectations follow recent industry data points that suggest
demand has tracked greater than we previously expected in H-P’s printer
supplies and outsourcing services businesses,” Reid wrote. “With
strength in these areas, offset by weakness in servers and storage, we
expect a favorable operating margin mix shift to result in an Apr
quarter EPS beat.”PC sales are still expected to be a weak point for
the company. This has typically been H-P’s largest business, accounting
for more than one-third of the company’s total revenue base in its most
recent fiscal year.Moskowitz of J.P. Morgan expects sales in
the personal systems group, which includes PCs and laptops, to fall
more than 23% in the second quarter from the same period last year.”We
expect H-P to benefit from the better than expected PC market trends
and the mix shift to the consumer,” he wrote. “The benefit stands to be
modest though, as better than expected units stand to be offset by
lower ASPs [average selling prices.]”Revenue from H-P’s enterprise
systems and software businesses is also expected to drop sharply.”We do
not expect H-P’s enterprise hardware business to be an outlier when it
comes to server and storage trends,” Moskowitz wrote.Amit
Daryanani of RBC Capital Markets said he expects H-P’s recent
cost-reduction efforts to show “EPS resiliency.” He said investors are
likely to focus on the results from the printing side as well as the
company’s guidance.”While we don’t believe we are out of the woods yet
from a macro perspective, we think conditions are incrementally more
positive,” he wrote in a note Monday. -
AuthorMay 19, 2009 at 12:37 PM
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