Hewlett-Packard fell short of expectations with its third-quarter results, but executives at the company vowed to post improvements in the current quarter and said they will undertake cost-cutting measures, including 1,300 more layoffs, to achieve their goal.
The company posted revenue of US$17.35 billion for the quarter ended in July, up nearly 5 percent from last year but about $100 million below consensus expectations. Earnings totaled $297 million, a vast improvement over the year-ago period, when the computer giant posted a massive loss, but also about $200 million short of expectations.
“The third quarter is always tough,” Fiorina said in a conference call, noting the seasonality of the PC business. “But still, we should have done better. We’re confident in our strategy and the actions we’re taking.”
Those actions include the additional 1,300 layoffs and stepped-up efforts to move some operations to lower-cost technology centers, such as India, China and the Philippines. The job cuts are expected to occur in the enterprise and consulting divisions. HP now employs about 140,000 people, down from 153,500 18 months ago.
HP shares tumbled after the news hit, falling nearly 10 percent in early trading Wednesday to $19.93.
Where the Jobs Are
Good news came from HP’s longtime core business of printing and imaging, where profit margins remained strong. That robust performance likely will be a boost to the company’s recent rollout of more than 100 products for home technology users. Many of those products are aimed at convincing users to upgrade their printers and digital photo tools.
“HP remains strong in that sector, which is the core of its brand and its legacy,” IDC analyst Angele Boyd told the E-Commerce Times. “That gives it something to build on and a way to reduce its reliance on the PC market’s fluctuations.”
Price War Casualties
In contrast, weak areas included HP’s PC business, where it is locked in a vicious battle with Dell for the number-one ranking, a title the two companies have swapped back and forth in recent quarters. The PC division lost $56 million in the quarter. Fiorina said a bid to grab market share by cutting PC prices — a step not matched by Dell — was one of the culprits.
Lackluster enterprise sales of high-end servers and storage devices also hurt the bottom line. That division lost $70 million, although part of the loss was tied to restructuring costs connected to a shakeup of the company’s worldwide sales force.
Saying some of HP’s third-quarter woes stemmed from a lack of solid execution, Fiorina noted that the company is determined to report profits across all divisions in the current quarter. She said it appears this turnaround will have to take place without the benefit of a short-term jump in the technology economy.
“We don’t see a rapid upturn in IT spending,” Fiorina said.