Share “HP's 2Q offers hope even as revenue slump...”

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

Whitman suggested HP's revenue could start rising again in the next fiscal year ending in October 2014, though she said the company still has a lot of work to do to make that happen.

"We have to do a better job managing the transition from the technologies that power the past to the ones that will power the future," Whitman said.

To gain some financial stability during the upheaval, HP is in the process of eliminating nearly 30,000 jobs and shedding other expenses to help offset its waning revenue. Through April, HP had jettisoned about 18,800 workers during the past year.

That's the main reason that HP's earnings are holding up better than Wall Street anticipated, Edward Jones' Kreher said.

HP earned $1.1 billion, or 55 cents per share, during its most recently completed quarter. That was down 32 percent from $1.6 billion, or 80 cents per share, last year.

If not for certain items unrelated to its ongoing business, the company would have earned 87 cents per share in its fiscal second quarter. That figure topped the average estimate of 81 cents per share among analysts surveyed by FactSet.

HP's revenue totaled $27.6 billion — about $400 million below analyst projections.

HP's biggest problems are rooted in its personal computer business. Revenue in that division plunged by 20 percent from last year.

In comparison, rival Dell Inc.'s PC sales declined by 9 percent during the same period. By Dell's own admission, the company aggressively slashed its PC prices to prod reluctant consumers and corporate customers into buying laptop and desktop machines.

HP also is lowering PC prices, but not as dramatically as Dell, according to Cathie Lesjak, the company's chief financial officer.

"We are focused on profitable growth," Lesjak said in an interview. "We will walk away from deals that really throw us into a loss and don't generate good value for HP."

Dell is in the process of trying to gain shareholder approval to sell itself to its CEO, Michael Dell, and a group of investors for $24.4 billion.

Whitman believes HP can bounce back by inventing new technologies and packing them into appealing products more quickly, recapturing the spirit the company established as a Silicon Valley pioneer nearly 75 years ago.

HP's first foray into tablet computers and smartphones designed for the Palm operating system flopped two years ago. The company is now selling tablets running on Android and a recently introduced version of Windows, but it hasn't re-entered the smartphone market yet.

The effectiveness of Whitman's strategy is likely to be tested during the next few months as HP releases another wave of PCs that have touch screens and tablets in different sizes. HP is lowering the prices on its upcoming touch-screen PCs in an effort to lure more consumers.

All the new devices are expected to be on the market in time for the back-to-school season.