updated: HP's first quarter showed some strain as revenue was below expectations across the board, but cost-cutting allowed the IT giant to meet Wall Street estimates.
The company, which was viewed as recession proof by many, delivered first quarter earnings of $1.9 billion, or 75 cents a share, on revenue of $28.8 billion, up 1 percent from a year ago (statement). Earnings on a non-GAAP basis were $2.3 billion, or 93 cents a share. Wall Street was expecting HP to report earnings of 93 cents a share on revenue of $31.93 billion.
HP's outlook also left a little to be desired. HP said second quarter earnings will be 70 cents a share to 72 cents a share. On a non-GAAP basis, earnings for the second quarter will be 84 cents a share to 86 cents a share. Meanwhile, revenue will be down 2 to 5 percent from a year ago. For the second quarter, HP was expected to report earnings of 89 cents a share.
In addition, HP is expecting fiscal 2009 revenue will also fall 2 percent to 5 percent. Earnings for fiscal 2009 will be $3.19 a share to $3.31 a share, with non-GAAP earnings coming in at $3.76 a share to $3.88 a share. HP is assuming that current market conditions persist.
Wall Street was expecting annual earnings of $3.77 a share.
- HP isn't recession proof;
- HP has enough leverage to hit its profit targets;
- But don't expect a lot of growth;
- On the bright side HP at least can provide an outlook (most companies can't).
Despite the upbeat tone in his voice as he talked about confidence in the company, even in uncertain times, he was careful to use words like "prudent" and "nimble" as a way of describing the company's approach to the future. On the call, Hurd said the company is being realistic about the market in upcoming quarters and is trying to leverage its portfolio and model as a way to better position itself for the recovery. He said:
I don't want to bank on the fact that the economy is going to get better... I hope it gets better in Q2 but that's not how we've decided to run the company. We've decided to be prudent and... make sure we're in a lean position as we go forward.
Hurd also said it was too soon to draw any conclusions about netbooks, which have "done well for us." He said the company is "just out" with netbooks and it will take some time to develop sales metrics - "We'll have to see over time how that evolves."
By the numbers:
- HP's PC unit was whacked as sales fell 19 percent to $8.8 billion. Unit shipments were down 4 percent in the first quarter. Commercial PC sales fell 19 percent as consumer sales fell 18 percent. HP's PC unit delivered a profit of $435 million, down from $628 million a year ago.
- The printing business didn't do any better. HP's imaging and printing group saw revenue fall 19 percent to $6 billion. Supplies revenue fell 7 percent. However, HP still has a printing cash cow with an operating profit of $1.1 billion, flat with a year ago.
- Enterprise storage and server revenue was $3.9 billion, down 18 percent. Storage revenue fell 7 percent. Operating profit was $405 million, down from $673 million.
- The software business saw a revenue decline of 7 percent to $878 million. Operating profit was $140 million, up from $49 million.
- Services revenue was up 116 percent to $8.7 billion, but that was all because of the EDS acquisition. Operating profit was $1.1 billion.