HP shares sink on PC demand
Shares of Hewlett-Packard (NYSE:HPQ) traded sharply lower on Thursday morning following a disappointing third quarter report. Early in the session shares were down by almost almost 11% to $22.70. During the third quarter the company reported its net income rose to $1.4 billion, or $0.71 per share. A nice improvement in comparison to its third quarter of last year where the company reported a loss of $8.9 billion, or $4.49 a share. However even with increasing net income, earnings per share and revenues declined with the demand for PCs. Excluding items, earnings dropped to $0.86 from $1.00 a share a year ago. On the topline revenues plummeted 8% to $27.23 billion from $29.67 billion. These results fell short of analyst consensus estimates in some regard. Analysts had expected the company to report earnings excluding items of $0.86 a share on $27.29 billion in revenue.
HP saw weakness through a number of prominent business segments. PC revenue on a year over year basis was down 11%; printer revenues were down 4%; servers, storage and networking revenues were down 9%; business services down 9%; financial services down 6%; and software up 1%. Even with major headwinds management felt the need to up its guidance to reflect operating improvements. The company now expects adjusted full-year earnings of $3.53 a share to $3.57 a share. It had previously expected adjusted earnings of $3.50 a share to $3.60 a share.
Chief Executive Officer, Meg Whitman, wasn’t overly optimistic about the business environment in the remainder of the year. Increasing competition within the company’s core operations amid decreasing demand has created a tough environment for profitability. PC sales continue to decline as the popularity of tablets and other handheld technology rises. In an attempt to solidify growth, the company is working through a large number of layoffs. HP is set to release 29,000 of its workforce to improve margins and hopefully retain its earnings power. Following the announcement it is expected analysts will update their own guidance to reflect the most recent results. If you would like a copy of the submitted SEC filings you can visit HP’s investor relations website.
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