August 27, 2002 3:36 PM PDT
Hewlett-Packard hits estimates
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Including nearly $3 billion in merger-related charges, HP said its net loss was $2 billion, or 67 cents per share, on revenue of $16.5 billion for the three months ended July 31.
Excluding the restructuring and other charges, HP would have earned 14 cents per share for the just-ended quarter, matching the projections of a consensus of analysts polled by First Call. Revenue had been pegged at around $16.7 billion, according to various analyst reports.
Had HP and Compaq been combined last year, the two companies would have earned $320 million, or 11 cents per share, excluding charges, on revenue of $18.6 billion, the company said.
HP Chief Executive Carly Fiorina said that other companies are experiencing the same pressures that prompted HP's decision to acquire Compaq, noting recent moves by Sun to offer Linux-based machines, by Dell to sell PCs to resellers and by IBM to acquire the consulting arm of PricewaterhouseCoopers.
"We moved early and decisively," Fiorina said on a conference call with analysts. "As a result, we are well into our integration efforts."
HP said it expects to post earnings in the current quarter, excluding charges, of 22 cents per share on revenue of $17.4 billion. That's in line with current Wall Street estimates for the company, HP said.
HP also said its cost-cutting efforts remain on track, saying that it has completed 4,740 job cuts and will meet its goal of 10,000 job cuts by the end of October. HP said the layoffs and other cost-cutting moves will result in savings of $500 million in 2002, $2.5 billion in 2003 and $3 billion in 2004, also in line with the company's stated goals.
HP said, too, that it's on a pace to save $419 million a year on its direct-procurement costs and is on track to meet its goal of saving $45 million in annual information technology costs by Oct. 31. The company also said it has reduced the amount of facilities space it uses by 2 percent and should hit a 19 percent reduction by 2004.
In June, HP forecast it would take in revenue of $35 billion to $36 billion during the six months ending with, and including, October. The company did not give specific earnings projections, but predicted that gross margins for the second half of the year would be 25 percent to 26 percent, on par with first-half figures.
HP said its personal systems unit, which includes consumer and business PCs, workstations and handhelds had revenue of $4.8 billion, down 18 percent from the prior quarter and 19 percent from a year ago. The company blamed the declines on the poor economy, price pressure and its post-merger product transitions.
The enterprise business, which includes servers, software and storage products, saw revenue of $3.8 billion for the quarter, down 22 percent from a year ago and 8 percent from the prior quarter. HP cited continued weakness in corporate spending as well as product transition issues.
Hewlett-Packard hits estimates
Carly Fiorina, CEO, HP
"There is no question that our first quarter as a combined company was a challenging one." HP President Michael Capellas said during a conference call with financial analysts.
Once again, the brightest spot of HP's results was its imaging and printing business. However that unit also saw a sequential decline of 3 percent, to $4.7 billion. On a year-over-year basis, sales increased 10 percent.
Separately, Fiorina said that HP has been taking a second look at how to account for stock options, but said "we are not prepared to commit to expensing options" immediately.
HP, which first granted options in 1964, has 470 million options outstanding as of July 31, with less than 5 percent of those options held by executive management, Fiorina said.
Ahead of Tuesday's announcement, HP shares were at $14.10, off 75 cents, or 5 percent.