Hewlett-Packard avoids the noose -- for now
The tech stalwart's earnings weren't as horrendous as feared, but even CEO Meg Whitman admits the turnaround has years to go.
Shares of the company -- founded by Bill Hewlett and Dave Packard in a one-car garage -- are sharply higher in Friday morning trading, buoyed by better-than-expected quarterly results and an upbeat earnings forecast. The actual numbers, however, were not good.
Net income fell 16% to $1.23 billion, or 63 cents per share, versus $1.47 billion, or 73 cents, a year earlier. Revenue fell 6% to $28.4 billion. Excluding one-time items, profit was 82 cents. Analysts surveyed by Bloomberg News expected profit of 71 cents on revenue of $27.8 billion. The company also gave bullish guidance.
HP's businesses serving both corporations and consumers posted across-the-board declines, indicating that much of the upside the company saw in the quarter came from cost-cutting. HP last year announced plans to slash 29,000 jobs from its workforce. While saving money is a good thing, companies can't just cut their way to profitability.
Whitman, the third HP CEO since 2010, is beginning to see some reasons for optimism. However, even she noted in an interview with CNBC today that the turnaround will take several years. The company expects the second half to be better than the first and for 2014 to be even better, Chief Financial Office Kathie Lesjak told the Wall Street Journal. HP was also optimistic that new products now in the works will gain traction with customers.
As the economy continues its slow road to recovery, companies will increase spending on computer hardware, software and services. Gartner expects worldwide info-tech spending to hit $3.7 trillion this year, up 4.2% from a year earlier. That's an increase from an earlier forecast of a 3.8% gain.
Unfortunately, HP's main rival IBM (IBM) remains a formidable competitor. Big Blue recently reported a record quarterly profit. While revenue at the Armonk, N.Y., company is likely to be flat over the next two quarters, HP's sales are expected to decline. Dell (DELL), which is going private, also is showing some signs of improvements in stemming its own stunning decline.
Whether Whitman will get enough time to finish righting the HP ship remains to be seen.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).
Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More
More Market News
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'