H-P Spinoffs Give First Looks
25 November 2015 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 11/25/15)
By Robert McMillan
HP Inc. and Hewlett Packard Enterprise Co. became separate
companies on Nov. 1., but on Tuesday, they offered forecasts that
shed a harsh light on the market conditions that the newly minted
siblings must face alone.
For HP, the problem is simple: The world is enthralled by mobile
phones and moving away from the printers and personal computers
that made up the bulk of the company's $12.7 billion revenue in the
fourth quarter ended in October.
"It was a pretty tough market dynamic," said HP Inc. Chief
Executive Dion Weisler. Printer and PC sales were both down 14%
year on year, and the company offered a weaker-than-expected profit
forecast for both the current quarter and the year ahead, forcing
HP Inc. to accelerate its cost-cutting measures.
The company had planned to lay off 3,300 employees over the next
three years, but it is accelerating that program and expects the
layoffs to be completed within the year. Mr. Weisler said the
company was looking at additional cuts: "We are certainly looking
at the nonrevenue-generating expenses of the organization."
Mr. Weisler said he was hoping for a breakthrough hit when the
company introduces a new 3-D printer next year.
HP Enterprise CEO Meg Whitman joined Mr. Weisler in reporting
the last-ever quarterly earnings of their former company. Her
challenge is to find a way to earn profits in an era when companies
are increasingly use cloud-computing services that run
predominantly on equipment HP Enterprise doesn't sell.
Earlier this year, H-P redoubled efforts to sell low-cost
servers to cloud computing companies, and those efforts are bearing
fruit, Ms. Whitman said. Sales of low-cost servers based on Intel
Corp.'s microprocessors were up 5%, year on year.
For the current quarter, HP Inc. forecast earnings per share
between 33 cents and 38 cents a share, significantly below the 42
cents analysts expected according to a survey conducted by Thomson
Reuters. For fiscal 2016, earnings will be in the $1.59 to $1.69
range, below the $1.71 expected by analysts.
The tough times are nothing new to Ms. Whitman and Mr. Weisler.
The combined H-P has reported a revenue decline in 16 of its past
17 quarters.
Although revenue numbers are likely to change slightly as the
independent companies figure out precisely how to credit joint
sales, HP Enterprise reported segment revenues of $14.1 billion for
the quarter, while at HP Inc. revenues totaled $12.7 billion.
Because H-P reported the results as a combined company, it
didn't break down profit performance for the two new entities. On a
combined basis, earnings were 93 cents per share, excluding certain
charges. Analysts had been expecting 97 cents per share.
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(END) Dow Jones Newswires
November 25, 2015 02:47 ET (07:47 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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