HP's Q3: Revenue declines plague units; Outlook lowered

HP's Q3: Revenue declines plague units; Outlook lowered

Summary: HP is "still in the early stages of a multi-year turnaround," said HP CEO Meg Whitman.

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HP saw revenue declines in four of its six units due to economic "headwinds" and ongoing restructuring efforts.

In other words, HP is "still in the early stages of a multi-year turnaround," said HP CEO Meg Whitman.

HP's third quarter results came in largely as expected. HP telegraphed that it would take hefty charges related to its enterprise services unit.

Meanwhile, HP cut its fiscal 2012 outlook. The company said its non-GAAP earnings would be $4.05 a share to $4.07 a share. Wall Street was expecting $4.07 a share for the year. HP also sees GAAP losses of $2.23 a share to $2.25 a share for the year.

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The stat lines for HP largely show third quarter revenue declines across the board. To wit:

  • PC revenue was down 10 percent from a year ago.
  • Imaging and printing revenue fell 3 percent from a year ago.
  • Services revenue fell 3 percent from a year ago.
  • Enterprise servers, storage and networking sales fell 4 percent as business critical systems (Itanium) revenue dropped 16 percent.
  • HP financial services revenue was flat.
  • And software revenue was up 18 percent.
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For the third quarter, HP reported a net loss of $8.9 billion, or $4.49 a share, on revenue of $29.7 billion, down 5 percent from a year ago. The loss is attributed to a goodwill charge related to the services unit and restructuring.

Excluding those charges---which totaled $10.8 billion---HP would have earned $1 a share. Those results were in line with the company's preannouncement.

HP reiterated that its plans were to restructure, manage costs closely and deliver on strategic changes all while improving the company's balance sheet.

By the numbers:

  • HP generated $2.8 billion in cash flow in the third quarter.
  • Inventory was $7.3 billion, up 1 day from a year ago to 29 days.
  • Research and development spending was $854 million in the third quarter, up from $812 million a year ago.
  • HP had cash and equivalents of $9.5 billion as of July 31.
  • Notebook revenue fell 13 percent from a year ago.
  • Printer supply revenue fell 3 percent from a year ago.
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Topics: Hardware, Hewlett-Packard

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17 comments
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  • 4 easy steps to an HP turnaround

    1) $129 7" WinRT tablet.
    2) $199 10" WinRT tablet.
    3) $299 10" WinPro tablet.
    4) $499 13" W8 touchscreen ultrabook.
    Johnny Vegas
    • That is cheaper than android tablets

      and android doesn't have a licensing fee.

      Even if HP could somehow meet those prices it would just add more razor thin margin products they sell.
      Emacho
      • And yet netbooks offer far more and for $250 or less

        Also, if you did something for a living and thought you were blessed by getting only razor-thin margins, would you keep doing it, deciding other venues must surely allow for actual prosperity?

        After all, if you can't bring in money to spend, other businesses in turn don't get the money and they go under as well... (cause and effect... it's a cool concept...)
        HypnoToad72
    • Do you run a business?

      Price a product lower than the cost to make it and you go out of business.

      That's the nature of competition...
      HypnoToad72
    • Agreed and currently HP is as good as Apple in Ultrabooks

      I'm sure HP's problema is not their quality in hardware, specifically in the laptop market they could be as good as Apple in the Ultrabook category.

      Take for example their HP Envy Spectre XT which boots in 10.7 seconds, has Intel Corei7-3667U Processor, backlit keyboard, 256GB SSD and 4GB of memory, has 8 hours of battery, HD 720p webcam and only weights 3 lbs.

      This device probably beats the most advanced Mac Book Air in Price, specs and design, but have you seen any ads in TV or Internet about this beauty? I don't.
      I think HP needs to invest more in advertising since they build really good products in the laptop market.

      Some people could say the MBA has Thunderbolt and an extra USB 3.0, but they don't tell you the Spectre XT from HP comes with full licenses of Adobe Premiere Elements and Adobe Photoshop Elements which are worth about $250.
      Gabriel Hernandez
  • Sell Off The PC Business

    HP made noises about doing this last year, then seemed to back off. But you know it makes business sense. With Acer and Lenovo reporting 2% net margins, do you really want to continue slumming it down there?

    Nobody makes money from PCs any more, except Intel and Microsoft. Several companies are doing quite well with Android; how about joining them?
    ldo17
    • Android

      Amazon and Google have set the 7 inch android tablet market to razor thin margins already.

      Android phones are a crowded market already.

      Unless HP does something innovative with an android device they will most likely just be another also ran.
      Emacho
      • Re: Android phones are a crowded market already.

        What a severe lack of imagination you show. Android isn’t just about phones—it’s a platform for a whole ecosystem of ultramobile devices.

        For example, Nikon just releasedd an Android-based camera. Think of the kind of apps you can run on a device optimized for taking pictures, rather than for making phone calls. That’s the kind of innovation an open platform makes possible—provided you have the imagination to realize it!
        ldo17
    • Or Apple -

      it's the same off-the-shelf hardware, which manages a 60% profit margin...
      HypnoToad72
    • re:

      " Several companies are doing quite well with Android; how about joining them?"
      Oh, you mean great Android companies like:
      HTC: http://www.zdnet.com/blog/btl/htc-posts-poor-q4-results-loses-android-mojo-to-samsung-apple/66332
      LG: http://www.washingtontimes.com/news/2012/jul/25/lg-electronics-profit-falls-as-mobile-loses-money/print/
      Motorola: http://www.theverge.com/2012/1/26/2742544/motorola-mobility-loses-80m-in-q4-on-3-4b-revenue-ships-10-5m-phones

      The only Android companies doing well is Samsung and several (local) chinese companies like ZTE and Huawei
      Martijn2
      • Companies Doing Well With Android

        Yes, HTC, which reported 8% net profit in its last quarter. As opposed to Acer and Lenovo at 2%, and HP at a loss.
        ldo17
    • Samsung is doing well with Android. What others?

      HTC? Nope.
      Sony? Nope.
      LG? Nope.
      Moto (now Google). Nope (continuing their patent trillion to try and stay relevant).

      ZTE? Nope (just posted largest fall in profits in 6 years)

      What several companies are doing well with Android? I count 1.
      Bruizer
  • I CAN TURN AROUND HP

    Hp boring machines and apple ripoffs.

    Don't sell out as a cheaper apple. Go balls out and actually innovate.i can show you the way hit me up.
    DeathDealer35
  • Whitman is a complete moron

    They're doomed.
    jackbond
    • She could be very bright,

      but caught in the middle of events she did not create or is incapable of reversing because she has no control over the entire paradigm in the first place...
      HypnoToad72
  • The CEO is a Failure!!!

    As I so stated earlier a few months ago this CEO is worthless for HP and she has no clue or vision or creativity on turning the Company Around. If you don't get someone with a real Hardware Knowledge running the company it will continue to decline.

    Id do the job for 250k a year plus benefits and Vacation and a Home the rest you could invest back into developing new innovations in the company....
    wpreece
  • She was on the board that helped create the mess.

    She is not "caught in the middle".
    Bruizer