This Feb. 21, 2012 file photo shows a Hewlett Packard logo in Frisco, Texas.LM Otero/The Associated Press
Hewlett-Packard Co. reported fiscal second-quarter profit that exceeded analysts' estimates as corporate technology spending picked up ahead of the computer maker's planned separation into two companies.
Profit before certain items was 87 cents (U.S.) a share in the period that ended in April, the company said Thursday in a statement. Analysts on average had projected 86 cents a share, according to data compiled by Bloomberg.
Hewlett-Packard's main businesses – selling servers, software and personal computers – have been weakened by the twin forces of cloud computing and mobile devices, which let corporations use less on-premise technology. The company is splitting into two entities – one selling PCs and printers, and the other supplying technology to businesses – by the end of the year, seeking to become more responsive in each market.
To shore up growth in the meantime, the company has released new mobile devices targeted at businesses, and acquired wireless-networking company Aruba Networks Inc. to help it compete with Cisco Systems Inc.
"The way HP is structured is to add value across all lines and innovate," said Jeffrey Fidacaro, an analyst at Monness Crespi Hardt & Co., who has a buy rating on the stock. He said investors are focused on "the balance between how are the fundamentals doing and how is the separation doing."
Executive Appointments
Hewlett-Packard filled in some executive appointments for the post-split businesses. Cathie Lesjak, the company's chief financial officer, will become the CFO of HP Inc. Lesjak, who was briefly Hewlett-Packard's interim chief executive officer, has traditionally worked closely with current CEO Meg Whitman. Whitman will take that role at the enterprise business after the split.
Chris Hsu, a senior executive in operations, will become chief operating officer of Hewlett Packard Enterprise, overseeing real estate, procurement and business processes, the company said Thursday.
Tim Stonesifer, currently CFO of Hewlett-Packard's enterprise group, will take that position at Hewlett Packard Enterprise. Alan May is also joining that business as head of human resources from Boeing Co., where he held the same position in the commercial airplanes division.
Hewlett-Packard shares rose about 1.8 per cent following the report. They gained 2.3 per cent to $33.83 at the close in New York, leaving them down 16 per cent this year.
Sales Decline
Second-quarter sales shrank 6.8 per cent to $25.5-billion, compared with analyst projections for $25.7-billion, according to data compiled by Bloomberg. Net income fell 21 per cent to $1.01-billion from $1.27-billion a year earlier, the Palo Alto, Calif.-based company said.
Every single Hewlett-Packard business unit posted revenue declines in the quarter. Personal systems group sales fell by 5.3 per cent, and printer unit revenue dropped 7 per cent. Enterprise group sales slipped 1 per cent, buttressed by an 11 per cent rise in sales of industry-standard servers.
"I don't see many bright spots," said Dan Morgan, a senior portfolio manager at Synovus Securities Inc., which owns 288,020 shares of the company.
Cash flow from operations was $1.5-billion in the recent period, down 51 per cent from a year earlier. The company is maintaining its free cash flow forecast for fiscal 2015 at $3.5-billion to $4-billion, Lesjak said in an interview.
Third Quarter
For the third quarter, which ends in July, profit before certain items will be 83 cents to 87 cents a share. Analysts on average had projected 87 cents, according to data compiled by Bloomberg.
Since announcing its intention to split in October, 2014, Hewlett-Packard has faced global weakness in the PC market and rapid growth in cloud computing, where lower-cost server makers are winning data-center business. Investors expect the new PC and printer company, HP Inc., to generate reasonably predictable results – barring major success for in-development areas, like 3-D printing, according to Jayson Noland Sr., a senior analyst at Robert W. Baird & Co.
"It's not a growth business, but they'll continue to make money," he said. Hewlett-Packard Enterprise, the corporate-focused business, will be a more unpredictable buy, he said. "There's growth in enterprise but there's also a significant level of change."