HP bottom line falls short of expectations

News General Global 21 AUG 2015
HP bottom line falls short of expectations

HP reported underlying earnings better than expected in its fiscal third quarter to July. Adjusted earnings fell to USD 0.88 per share from USD 0.89 a year ago, less than the company's outlook for USD 0.83-0.87. Net revenue declined 8 percent year-on-year to USD 25.3 billion. Excluding currency effects, revenue was down 2 percent. 

Reported earnings dropped to USD 0.47 per share from USD 0.52 a year ago, missing HP's outlook of 50-54 cents. The reported result includes after-tax costs of USD 750 million and USD 0.41 per share for the costs of separating the PC business, amortization of intangible assets, impairment of data centre assets and changes for retirement settlement, acquisitions and restructuring. Operating cash flow more than halved, to USD 1.7 billion from USD 3.6 billion in the year-earlier quarter. 

The PC business posted a 3.0 percent operating margin on sales down 13 percent. Commercial revenue decreased 9 percent and consumer revenue fell 22 percent, and total unit sales dropped 11 percent. Printing revenue was also down 9 percent year-over-year, but the activities recorded a 17.8 percent operating margin. 

The Enterprise Group recovered to 2 percent revenue growth with a 13.0 percent operating margin. Networking revenue was up 22 percent and server revenue grew 8 percent, while storage was down 2 percent, and technology services fell 9 percent. Revenue from Enterprise Services was still down 11 percent year over year with a 6.0 percent operating margin. Infrastructure Technology Outsourcing revenue fell 13 percent, and Application and Business Services revenue declined 7 percent. HP's software revenue declined 6 percent year over year with a 20.6 percent operating margin. 

HP CEO Meg Whitman said the company made good progress on its separation plans in the quarter, while the results showed a very strong performance in the Enterprise Group and substantial progress in turning around Enterprise Services. For fiscal Q4, HP forecast adjusted EPS of USD 0.92-0.98 and reported EPS of USD 0.12-0.18. One-time costs are expected to total 80 cents a share in the period. HP also narrowed its full-year outlook to adjusted EPS of USD 3.59-3.63, from a previous range of USD 3.53-3.73. Reported EPS is estimated lower than previously forecast, at USD 1.87-1.93, down from earlier guidance of USD 2.03-2.23

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Enterprise equipment, Financial figures, Consumer devices, Network equipment

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