Feeds

New HP CEO coasts through mediocre Q2

Warns of large and lumpy future

  • alert
  • submit to reddit

The Power of One Infographic

Did Carly Fiorina leave new CEO Mark Hurd an HP on the verge of collapse? Not at all, as evidenced by second quarter results that saw most of HP's main businesses turn profits. Ominously, however, management warned that significant layoffs could be on order in the months to come.

HP posted revenue of $21.6bn in the period - a modest 7 percent rise over the $20.1bn posted one year earlier (and just 4 percent higher in constant currency). The company's net income came in at $966m up from $884m in 2004's Q2. The results were for the period ended April 30. Hurd took charge of HP on April 1.

"HP had a solid quarter," Hurd said. "Nevertheless, our overall performance leaves room for improvement in many of our businesses. We expect to provide details as soon as our plans are finalized that will move us toward that objective."

Some financial analysts had been looking for Hurd to writedown goodwill from HP's acquisition of Compaq. The CEO provided no word on such a move at this time.

CFO Bob Wayman did, however, warn that HP could be expected to take more charges in the future as a result of layoffs. HP has been firing workers in relatively small chunks over the past few quarters. That pattern could change for the worst.

"The feeling here is that with Mark coming in as a new CEO and an additional emphasis on getting the entire structure of the company in line that the magnitude (of layoffs) will be larger and lumpier," Wayman said.

Large and lumpy is never a good combination for employees unless you're talking about a holiday bonus.

HP's PC business posted a $147m profit on revenue of $6.4bn. That revenue total was 6 percent higher than last year's Q2 total, and the company enjoyed 12 percent higher shipments. In the same period last year, HP's PC unit reported a profit of $44m.

The star Imaging and Printing unit reported just 5 percent revenue growth to $6.4bn. This came as the business's profit fell to $814m from $952m. "This reflects $71 million in workforce reduction costs, hardware pricing actions, hardware growth and mix shifts within supplies," HP said. During the quarter, HP had 1,900 workers - many of them in Imaging and Printing - accept voluntary severance packages.

The company's Server and Storage unit posted its highest profit since the Compaq acquisition closed at $184m. HP's Xeon- and Opteron-based servers grew 12 percent, while higher-end systems were up just 2 percent and storage sales fell 6 percent.

"We have a lot of work to do in storage to get this business back on track," Hurd said, during a conference call.

HP also had $24m in workforce reduction costs from this unit.

The Services business increased revenue by 14 percent to $4.0bn, generating a profit of $292m down from a profit of $332m last year. HP's Software unit pulled in $277m - a 23 percent rise year-over-year. The business posted a loss of $6m, which compares to a loss of $52m last year.

HP expects third quarter revenue to come in between $20.3bn and $20.7bn.

"(The third quarter), as you know, is always a tough quarter for us," Wayman said. "Q3 is just a difficult quarter."

Management's reticence surrounding the third quarter spooked some analysts. HP noted that consumer and European spending tends to be down in the period. But the Wall Street pundits were more concerned about HP's ability to show stronger Printing and Imaging growth and to increase profits while making large workforce cuts.

Hurd, touted as a ruthless efficiency expert, reminded the analysts again and again that he would turn HP into a lean, mean machine. "What is clear . . . (is that) hard work lies ahead of us if we are to get HP's overall performance where it needs to be." ®

Related stories

HP's Hurd faces first big test - was the Compaq buy a failure?
HP thins UK support contract - sends hundreds of jobs to India
Fiorina ready to discuss 'most successful hi-tech merger in history'
HP prints up thousands of severance packages
NCR's Q1 goes the way of the Hurd
HP hit with a Moody...
Stern response to Otto's HP musings
Why Fiorina wasn't the right man for the HP CEO post
HP makes Hurd the $20m man
HP's Hurd lets us pretend Compaq never happened
Never Hurd of the new HP boss?
HP bets on the Hurd mentality for CEO

Boost IT visibility and business value

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.