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 user 2008-09-18 at 3:13:10 pm Views: 98
  • #20643
    Hewlett’s Printing Business Struggles
    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

    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.

    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.