HP beats the odds on Q2 earnings despite looming layoffs

Summary:Amid worries about layoffs and where the company is headed from here, HP reported better than expected second quarter earnings on Wednesday.

Following a dismal turnout from Dell on Tuesday, Hewlett-Packard fared far better for the second quarter of 2012.

HP reported a net income of $1.9 billion, or 80 cents a share (statement). Non-GAAP earnings were 98 cents a share on a revenue of $30.7 billion. Separately, HP announced 27,000 job cuts and said it would plow the savings back into R&D.

Wall Street was expecting HP to report second quarter earnings of 91 cents a share on revenue of $29.92 billion.

CEO Meg Whitman commented in prepared remarks:

We are making progress in our multi-year effort to make HP simpler, more efficient, and better for customers, employees, and shareholders. This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do.

On a conference call with analysts, Whitman added:

Overall, I feel cautiously optimistic coming out of Q2. Our results appear to be stabilizing. While I wouldn't say we've turned the corner, we are making progress. PSG held margins steady and an uptick in the commercial business helped offset continued weakness on the consumer side.

Investors must have been bracing for bad news on Wednesday after reports circled earlier this month that HP was looking to cut as much as 8 percent of its workforce with the service unit taking the brunt of the layoffs.

Dell's poor showing for the first quarter also looked like a bad omen, but Barclays analysts suggested after Dell reported that HP might actually be doing better thanks to "channel fill, rather than true end demand."

In plainer terms, HP might be shipping more units than Dell -- but not necessarily selling them to consumers and businesses. Concordingly, most hardware revenue numbers broken down by units were down for the second fiscal quarter, with a few exceptions, such as desktops up five percent.

As Whitman noted, in an effort to reassure investors and analysts, HP has announced that it is working out a roadmap for a multi-year plan to "fuel innovation and enable investment." That looks like it includes a leadership change for recently acquired Automony, which will now be run by HP's chief strategy officer and senior vice president of software, Bill Veghte.

Nevertheless, software overall was still up in revenue by 22 percent year-over-year.

For the outlook on the third fiscal quarter, HP is predicting non-GAAP earnings between 94 to 97 cents a share. For fiscal 2012, HP is planning to deliver non-GAAP earnings to land between $4.05 and $4.10 per share.

For the third quarter, Wall Street is expecting HP to report earnings of $1.02 a share on revenue of $30.24 billion. For fiscal 2012, Wall Street is looking for earnings of $4.03 on revenue of $122.3 billion.

Related:

Topics: Dell, Banking, Hewlett-Packard

About

Rachel King is a staff writer for CBS Interactive based in San Francisco, covering business and enterprise technology for ZDNet, CNET and SmartPlanet. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish Americ... Full Bio

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