HP Profit Falls 29%

(RTTNews) - Computer and printer maker Hewlett-Packard Co. (HPQ) said Wednesday after the markets closed that its third quarter profit fell 29% from last year, hurt mainly by higher restructuring charges even as revenue grew 1%.

The company's quarterly earnings per share, excluding items, came in line with analysts' expectations, but its quarterly revenue beat analysts' forecast. At the same time, the company narrowed its full year earnings outlook.

"Overall, I'm very pleased with the progress we've made," said Meg Whitman, chairman, president and chief executive officer, HP. "When I look at the way the business is performing, the pipeline of innovation and the daily feedback that I receive from our customers and partners, my confidence in the turnaround grows stronger."

HP shares are currently losing 0.28% in after hours trading after closing the day's regular trading session at $35.12, down 36 cents or 1.01%. The shares trade in a 52-week range of $20.25 to $36.21.

In May, HP said that it would eliminate 11,000 to 16,000 more jobs than the previously estimated 34,000 announced in connection with a multi-year restructuring plan adopted by the company in May 2012.

Whitman, who was appointed HP CEO in September 2011, has been making sweeping organizational changes for the past nearly one and half years in a bid to make HP a leaner and meaner company.

HP's Personal Systems revenue for the third quarter rose 12% year-over-year to $8.6 billion. For the quarter, notebook unit sales were up 18% and desktop unit sales were up 8%. In August 2012, HP announced strategic alternatives for this business, but later decided to keep it following a review.

HP performed well in this segment despite the weakness in the PC market. Last month, market research firm Gartner, Inc. (IT) said worldwide PC shipments grew 0.1% year-over-year to 75.8 million units in the second quarter of 2014, capping eight quarters of declining shipments. HP lost the world PC lead to China's Lenovo Group Ltd. during the second quarter of 2013.

Third quarter Printing revenue fell 4% from a year earlier to $5.6 billion. Revenue for the company's Enterprise Group grew 2% to $6.9 billion in the third quarter. Enterprise Services revenue for the quarter dropped 6% to $5.6 billion. HP's software revenue for the quarter fell 5% to $959 million, while HP Financial Services revenue slipped 3% to $855 million.

For the third quarter ended July 31, 2014, the Palo, Alto, California-based company reported net income of $985 million or $0.52 per share, compared to $1.4 billion or $0.71 per share for the year-ago quarter.

Excluding items, adjusted net income for the third quarter was $1.70 billion or $0.89 per share, compared to $1.68 billion or $0.86 per share in the prior year quarter.

On average, 25 analysts polled by Thomson Reuters expected the company to earn $0.89 per share for the third quarter. Analysts' estimates typically exclude special items.

Net revenue for the third quarter rose 1% to $27.59 billion from $27.23 billion in the same quarter last year. Twenty-five analysts had a consensus revenue estimate of $27.01 billion for the third quarter.

Operating margin for the quarter narrowed to 5.3% from 6.8% a year earlier, while adjusted operating margin for the quarter improved to 8.5% from 8.4% last year.

During the third quarter, HP repurchased about 17.5 million shares of common stock for $582 million and exited the quarter with $14.8 billion in gross cash.

Looking forward to the fourth quarter, HP forecasts earnings of $0.83 to $0.87 per share and adjusted earnings of $1.03 to $1.07 per share.

For the fiscal year 2014, the company now forecasts earnings of $2.75 to $2.79 per share and adjusted earnings of $3.70 to $3.74 per share. Previously, the company forecast earnings of $2.68 to $2.80 per share and adjusted earnings of $3.63 to $3.75 per share.

Analysts currently expect the company to earn $1.05 per share for the fourth quarter and $3.72 per share for the fiscal year 2014.