HP share price down as Q3 sales extend decline

Hewlett-Packard Co reported on Thursday a fourth straight quarterly drop in revenue, although earnings topped projections, as it prepares to split into two listed companies in November.

The worlds second-biggest PC seller said revenue fell 8% to $25.3 billion in the three months ended July 31st, a 15th decline in the past 16 quarters, from $27.6 billion a year earlier, weighed down by weak PC sales, lower demand for corporate services and a stronger dollar. Analysts on average had projected sales of $25.4 billion.

Net earnings fell to $854 million, or $0.47 per share, from $985 million, or $0.52, a year earlier. Excluding certain items, the company earned $0.88 per share, down from $0.89 a year ago, but topping analysts consensus forecast of $0.85.

Chief Executive Meg Whitman said that HP is now in the “final stretch” of a planned November 1st separation that will split the company into two Fortune 50-sized companies – a PC-and-printer maker, which generated sales of $56 billion last year, and a $55-billion server, services and software firm. HP Inc, which will focus on personal technology and printing, will be led by Dion Weisler and with Ms Whitman as chairman, while the corporate IT solutions business under the name Hewlett-Packard Enterprise will be run by Ms Whitman.

This, however, will not immediately solve HPs PC problem as consumers increasingly choose ever-faster mobile phones and tablets as a way to connect to the Internet, overlooking the traditional personal computer.

The company reported a 13% decline in the personal systems segment as commercial sales slid 9% from a year earlier, while deliveries of personal technology to consumers tumbled 22%, reflecting weaker global demand for desktop computers.

The printing segment also registered a contraction, with revenue sliding 9% year-on-year. Total hardware units fell 2% as commercial sales slid 6% and consumer units were flat, while revenue from printing supplies fell 6% as well.

“PCs, and print to some degree, had a tough quarter,” Ms. Whitman said in an interview. “We think, by the way, that these market conditions are going to continue for at least several quarters.”

However, HPs corporate-focused businesses, which will form HPE, were the bright spot in Thursdays report. Sales at the enterprise services division declined 11% but the profit margin rose to 6% from 4.1% a year earlier, while revenue at the enterprise group rose 2%, driven by strong sales of servers and networking equipment.

Ms. Whitman said HPs better-than-expected third-quarter earnings reflected the enterprise groups “very strong performance” and the “substantial progress” turning around the enterprise services division.

For the fourth fiscal quarter, HP expects to earn between $0.92 and $0.98 per share, excluding certain items, while for the full year it narrowed its forecast for EPS of $3.59 to $3.65 from a previous estimate of $3.53 – $3.73, largely matching analysts projections.

Hewlett-Packard Co settled 1.41% lower at $27.35 per share on Thursday in New York, marking a year-to-date drop of 31.85% and valuing the company at $49.41 billion. According to CNN Money, the 23 analysts offering 12-month price forecasts for Hewlett-Packard have a median target of $40.00, with a high estimate of $45.00 and a low estimate of $33.00. The median estimate represents a 46.25% increase from the last price of $27.35.