Hewlett-Packard Co reported on Tuesday quarterly performance below expectations and warned that the stronger US dollar will dent full-year results as the personal computer maker prepares to divide itself.
The Palo Alto, California-based company stated a revenue of $26.84 billion for the three months ended January 31 compared to a result of $28.40 billion a year earlier.
The worlds second-largest personal computer maker announced in October it would split into two stand-alone companies by the end of the financial year. HP said one of the new entities would be in charge of its personal computer and printer business, which has been struggling with the rise of the cloud computing technology, and the other would distribute its corporate-oriented software and services.
The split is aimed at better positioning the company, but HP said it would be hit by an extra $1.8 billion in costs over the next two years as a result of the move.
The company reported a net income of $1.37 billion, or $0.73 a share, down compared to the $1.43 billion, or $0.74 a share, stated during the same period a year ago. Excluding certain items, net profit came in at $1.7 billion or $0.92 per share.
Performance compares with projections of $27.34 billion in revenue with per-share earnings of $0.92, according to a survey compiled by Thomson Reuters.
Revenue from HPs computer and printer business fell slightly to $14.08 billion in the quarter versus $14.69 billion in the previous year. Following the split the division will be named HP Inc and headed by Dion Weisler, who is currently executive vice president of the unit.
The companys other big division, which will be dubbed Hewlett-Packard Enterprise, generated $27.75 billion of sales during the reported period, down compared to the $29.45 billion a year ago. The new entity is expected to be led by Meg Whitman, currently chief executive of HP.
The company reported revenue decrease across all of its segments, excluding notebook sales, which grew 9%, and industry servers, which expanded by 7%.
For financial 2015 HP projected adjusted per-share earnings to range between $3.53 to $3.73, reduced by $0.30 by the stronger US dollar. Excluding currency effects, the company said results for the financial year ending October would have been in line with HPs previous target. In comparison analysts had projected profit of $3.95 a share.
The company exports more than 60% of its product and services, making it highly vulnerable to currency shifts and reducing the value of the revenue generated outside its domestic market.
“With the first quarter of fiscal 2015 now behind us, the HP turnaround remains on track,” said Ms. Whitman.
HP gained 0.79% on Tuesday and closed at $38.49 in New York, marking a one-year increase of 28.64%. The company is valued at $69.79 billion. The stock plummeted 7.12% to $35.75 during pre-market trading on Wednesday.
According to the Financial Times, the 23 analysts offering 12-month price targets for HP have a median target of $43.00, with a high estimate of $50.00 and a low estimate of $36.80. The median estimate represents a 11.72% increase from the last closing price.
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