Post-merger HP posts $2bn loss

Pretty much as expected following rather expensive acquisition
Written by Ian Fried, Contributor

Pretty much as expected following rather expensive acquisition

In its first financial report to include the impact of its Compaq Computer acquisition, Hewlett-Packard on Tuesday reported earnings that matched analysts' estimates and said the current quarter is also on track to meet projections. Including nearly $3bn in merger-related charges, HP said its net loss was $2bn, or 67 cents per share, on revenue of $16.5bn for the three months ended 31 July. Excluding the restructuring and other charges, HP would have earned 14 cents per share for the quarter, matching the projections of a consensus of analysts polled by First Call. Revenue had been pegged at around $16.7bn, according to various analyst reports. Had HP and Compaq been combined last year, the two companies would have earned $320m, or 11 cents per share, excluding charges, on revenue of $18.6bn, the company said. The report has been considered the first major test of how the merger is going, more than three months after it was completed and nearly a year after the companies first announced plans to join. 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 during 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 $17.4bn. 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 its personal systems unit, which includes consumer and business PCs, workstations and handhelds had revenue of $4.8bn, down 18 per cent from the prior quarter and 19 per cent 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 $3.8bn for the quarter, down 22 per cent from a year ago and 8 percent from the prior quarter. HP cited continued weakness in corporate spending as well as product transition issues. HP also saw declines in its services business amid slower demand for consulting services. Revenue was at $3bn, down seven per cent from the same quarter a year ago and three per cent from the previous quarter. "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. Ian Fried writes for News.com
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