HP quarter shows weak enterprise,
strong print business

HP’s latest quarterly report showed a company with businesses both succeeding and failing for the period which ended Jan. 31. HP’s printer business accounted for most of the company’s profits, while its enterprise computing business — future home to the HP 3000 customers planning to migrate to HP’s Unix, Linux or Windows NT platforms — posted yet another loss.

The unvarnished numbers showed a company cutting costs at a record rate in order to post a profit on the bottom line. HP reported Generally Accepted Accounting Practices profit for the period of $879 million on revenues of $17.9 billion. Those revenue results fell below analyst expectations, leading to sell-off of the stock. Many analysts in the markets view the profits as a result of HP’s cost-cutting. HP reported it reduced its costs by $734 million during the quarter through layoffs, office closures and procurement savings. About half of the cost reductions came from laying off employees.

The HP enterprise systems group, which will only be selling HP 3000s for another seven months before it switches to all Unix, Linux and NT systems, lost $83 million during the quarter. Revenue dropped 17 percent from the same period one year ago. HP still claimed the enterprise business would regain profitability in the second half of 2003. The group's losses were reduced by 36 percent over the fourth quarter of fiscal 2002.

In sharp contrast to the losses in its Unix and NT businesses, HP’s printer business posted an operating profit of $903 million, slightly lower than last quarter. In addition to a small $33 million profit posted in its PC group, the other HP business to post an operating profit was its Services group.

Analysts found no new evidence of an enterprise business rebound in the HP report, and so continue to expect sales to lift — this during a period which HP said didn’t reveal any growth trend or further decline in IT spending. “Today’s world is full of uncertainty and predictions are difficult,” said CEO Carly Fiorina. “Our revenue shortfalls were largely confined to the US market, as weak commercial spending continued.” The markets reacted to the report by selling down HP’s stock almost 15 percent during the trading day which followed the report.