HP quarter lifts revenue, but dips future guidance
HP reported its second straight quarterly
increase in revenues with figures for its Q2 of 2005, but the new CEO
has warned investors the company is looking at a slower period that
will end on July 30. Mark Hurd said in an analyst briefing that he
plans more cutbacks at the sector which sells HPs follow-up
solution for 3000 customers who want to migrate.
Analysts called HP's 9 percent profit
increase a solid quarter. Sales set a record for any HP quarter and
rose a little more than 7 percent, exceeding expectations. But Hurd
said Wall Street should lower its profit expectations for HP through
Enterprise Storage and Servers (ESS), the
unit which makes the HP-UX servers on many migrating customers
2006 calendars, reported revenue of $4.2 billion, up 6 percent over
the prior-year period. Windows-based systems led the way; HP said
such industry-standard server revenue increased 12
percent, while the Unix-based business-critical systems (BCS) revenue
grew 2 percent.
HP seems to be making some headway in
its goal to transform half of its enterprise server business to the
Itanium-based Integrity line. Revenue for the HP Integrity servers
grew 37 percent year-over-year. HP wants to increase its
Itanium-based server sales by more than 100 percent; the servers
represented just one in five sales as of the start of fiscal 2005.
HP-UX-related revenues, including operating system license sales,
grew 9 percent.
HPs ESS business, including its
storage sales, stayed in the black with an operating profit of $184
million, up from a profit of $119 million in the prior-year period.
ESS managed its profit even though the company spent $24 million in
workforce reduction costs in the segment during the period.
The printer and imaging business gave
HP elbow room to handle tougher results from its PC segment, but even
HPs cash cow had to cut back last quarter. Operating profit for
printers and imaging was $814 million, down from a profit of $952
million in the prior-year period. This reflects $71 million in
workforce reduction costs, hardware pricing actions, hardware growth
and mix shifts within supplies.
Our overall performance leaves
room for improvement in many of our businesses, Hurd said. He
added that HP will be making more changes to itself to realize those
improvements. We expect to provide details as soon as our plans
are finalized that will move us toward that objective, he
HP began to break out its financials
with details on consumer and commercial markets in this
quarters report, indicating that its begun to see its
sales in PCs and printers differently. Analysts have called for a
spinoff of the consumer business at HP. PCs saw a better quarter,
with three times the profits of last years Q2.
The company advised investors to expect
about 20 percent less profits overall for the coming quarter, with
revenues to be down about $1 billion. Hurd called Q3 one of HPs
toughest traditionally perhaps a signal to migrating customers
to hold out for the best deals of the year. He had a history of
lowering expectations for financial results while at NCRs
After our reading of more than 75 HP
quarterly releases, this quarters report showed a more
conservative tone than any floated during Carly Fiorinas CEO
tenure. HP expects to improve its business position, but the latest
report reminds investors and customers alike that such an expectation
will take time to achieve. One thing looks certain HP is
re-evaluating all of its businesses value. Hurd told analysts
the company is still considering a writedown for goodwill of the
assets of the Compaq acquisition, a move that would devalue that
signature transaction of HPs Fiorina era.