HP Profit Meets Estimate; Revenue Falls Shy

(RTTNews) - Computer and printer maker Hewlett-Packard Co. (HPQ) said Wednesday after the markets closed that it swung to a third quarter profit from a year-ago loss that included hefty goodwill and asset impairment charges.

The company's quarterly earnings per share, excluding items, came in line with analysts' expectations, but its quarterly revenue fell shy of analysts' forecast.

Meg Whitman, HP president and chief executive officer, said, "I remain confident that we are making progress in our turnaround. We are already seeing significant improvement in our operations, we are successfully rebuilding our balance sheet, our cost structure is more closely aligned with our revenue and we have reignited innovation at HP, with a focus on the customer."

Separately, HP announced changes to its executive leadership team that will help the company accelerate its turnaround. Chief operating officer Bill Veghte will now become executive vice president and general manager of the company's Enterprise Group. Dave Donatelli, who was previously heading the group, will take on a new role focused on identifying early-stage technologies.

HP shares are currently losing 4.02% in after hours trading after closing the day's regular trading session at $25.38, down 46 cents or 1.78%. The shares trade in a 52-week range of $11.35 to $27.78.

Five out of HP's six reported segments recorded lower revenue for the quarter.

HP's Personal Systems revenue for the third quarter fell 11% year-over-year to $7.7 billion. For the quarter, Notebook unit sales fell 14%, while Desktop unit sales were down 9%. In August 2012, HP announced strategic alternatives for this business, but later decided to keep it following a review.

Last month, industry research firm International Data Corp. said global PC shipments in the second quarter of 2013 fell 11.4% from last year to 75.6 million units.

Another market research first market research firm Gartner, Inc. (IT) also said worldwide PC shipments in the second quarter fell 10.9% from a year earlier to 76.0 million units. Gartner said "This marks the fifth consecutive quarter of declining shipments, which is the longest duration of decline in the PC market's history."

During the quarter, China's Lenovo Group Ltd. overtook HP as the world's largest PC maker.

Third quarter Printing revenue declined 4% from a year earlier to $5.8 billion. Revenue for the company's Enterprise Group slipped 9% to $6.8 billion in the third quarter. Enterprise Services revenue for the quarter declined 9% to $5.8 billion. HP's software revenue for the second quarter grew 1% year-over-year to $982 million, while HP Financial Services revenue dropped 6% to $879 million.

Meg Whitman, who was appointed as HP CEO in September 2011, has been making sweeping organizational changes for the past nearly one year in a bid to make HP a leaner and meaner company. In May 2012, HP said that it expected to eliminate about 27,000 employees, or 8% of its workforce as of October 31, 2011, by the end of fiscal year 2014 as part of a restructuring that is expected to generate annualized savings of $3.0 billion to $3.5 billion, majority of which will be reinvested back into the company.

For the third quarter ended July 31, 2013, the Palo, Alto, California-based company reported net income of $1.4 billion or $0.71 per share, compared to a net loss of $8.9 billion or $4.49 per share for the year-ago quarter.

Excluding items, adjusted net income for the third quarter was $1.7 billion or $0.86 per share, compared to $2.0 billion or $1.00 per share in the prior year quarter.

On average, 27 analysts polled by Thomson Reuters expected the company to earn $0.86 per share for the third quarter. Analysts' estimates typically exclude special items.

Revenue for the third quarter fell 8% to $27.23 billion from $29.67 billion in the same quarter last year. Twenty-four analysts had a consensus revenue estimate of $27.29 billion for the third quarter.

For the full year fiscal 2013, the company now expects earnings of $2.67 to $2.71 per share and adjusted earnings of $3.53 to $3.57 per share. Previously, the company expected earnings of $2.50 to $2.60 per share and adjusted earnings of $3.50 to $3.60 per share.

Analysts currently expect the company to earn $3.57 per share for the fiscal year 2013.

Arch rival Dell Inc. (DELL) last week reported a 72% drop in second quarter profit, as revenue remained essentially flat and margins deteriorated amid sluggish demand for personal computers. However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue.