HP's 2Q offers hope even as revenue slump deepens

Published on NewsOK Modified: May 22, 2013 at 6:08 pm •  Published: May 22, 2013
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SAN FRANCISCO (AP) — Hewlett-Packard is still scrambling to meet the growing demand for more versatile and less expensive mobile devices as a slump in its personal computer sales deepens, but the company's cost-cutting measures and focus on more profitable areas of technology appear to be easing the pain.

The conflicting signs of further deterioration and potential recovery emerged in Hewlett-Packard Co.'s latest quarterly report released Wednesday.

Even as HP's revenue declined at the fastest rate yet in a nearly two-year slump, the company delivered fiscal second-quarter earnings that topped the estimates of both its own management and the analysts who influence investor perceptions.

"The results were better than feared," said Edward Jones analyst Bill Kreher.

HP provided Wall Street with another encouraging sign by predicting its earnings for the current quarter will top analyst projections. The Palo Alto, Calif., company also raised its earnings forecast for the full year, another sign that management is confident that HP's profits won't fall as dramatically as many investors feared while the PC market crumbles.

"You can feel the turnaround taking hold at HP," CEO Meg Whitman told analysts during a Wednesday conference call.

Investors evidently saw enough progress to believe HP is finally heading in the right direction. The company's stock soared $2.84, or more than 13 percent, to $24.07 in extended trading. If the shares move similarly in Thursday's regular session, it would be the biggest one-day percentage gain in HP's stock in more than four years. Even so, HP's stock would remain nearly 50 percent below where it stood just three years ago.

Since then, consumers and corporate customers have been gravitating toward smartphones and tablet computers equipped with touch screens and voice recognition technology. As these mobile devices add more features and grow increasingly powerful, their prices are falling, too, making them even more attractive compared with the laptop and desktop computers that HP makes.

Like many other PC manufacturers, HP was slow to respond to the shift and then stumbled trying to catch up with Apple and other manufacturers, such as Samsung Electronics, that make devices running Google Inc.'s Android operating system.

Those missteps are still haunting HP, as illustrated in its latest quarter. The results included the seventh consecutive decline in HP's quarterly revenue compared with the same period the previous year. HP's 10 percent decrease in revenue during the three months ending in April was the largest drop so far during the downturn.

Most of the erosion has occurred under the leadership of Whitman, a former CEO at eBay Inc. and defeated California gubernatorial candidate, who was hired to run HP in September 2011.

As she has repeatedly warned, Whitman emphasized HP remains on a "multi-year journey" as she cuts costs, overhauls the company's product line and pushes into more profitable niches in business software, data analysis and storage and technology consulting.

Revenue shrank in all those areas too during the second quarter, but not as severely as the PC contraction.

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