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AnonymousInactiveHewlett-Packard posts flat quarterly earnings
‘There is work to be done,’ says interim
chiefSAN 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
Wayman.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
released.Wednesday’s
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
enough.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
Valley.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
value.”_______________________________________________Better than expected Q1 at HPFebruary 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
profitability.”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. -
AuthorFebruary 24, 2005 at 9:45 AM
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