Slow Quarter for HP, but Printer Earnings Strong

HP Invent LogoFebruary 25, 2015 – Hewlett-Packard reported results for its first-quarter ending January 31, 2015, with net revenue of $26.8 billion, down 5 percent versus first-quarter 2014, and net earnings per share of $0.73, down 1 percent from the prior-year period, but within HP’s previously provided outlook of $0.72 to $0.76 per share. Net earnings were $1.4 billion, down 4 percent.

For the quarter, printing revenue was down 5 percent year-over-year. However, HP CFO Cathie Leskjak reported that profitabiity remained strong for the printer group with a 19.2 percent gain versus the same quarter a year ago. Net earnings for the first quarter for HP’s printer group were $1,067 million versus $979 million for first-quarter 2014. For the printer group, total hardware unit shipments were down 4 percent with commercial hardware unit shipments flat, and consumer hardware units down 6 percent. Printer-supplies revenue was down 5 percent.

HP Chairman, President and CEO Meg Whitman blamed the overall company lower earnings and revenue on a strengthening dollar, commenting, “With the first quarter of fiscal 2015 now behind us, the HP turnaround remains on track. We grew operating profit margins across all of our major business segments, increased investment in innovation, and executed well across key areas of our portfolio and in our separation activities.  Our progress continues as we head into Q2.” A strengthening U.S. dollar means U.S. products sold overseas become more expensive compared to competitors’ products, thus reducing their competitiveness.

Other 2015 first-quarter segment results include:

  • Personal Systems (PC) revenue was flat year-over-year with a 3.7 percent operating margin. Commercial revenue decreased 1 percent and consumer revenue increased 2 percent. Total unit shipments were up 9 percent, with notebooks units up 21 percent and desktops units down 7 percent.
  • Enterprise Group revenue was flat year-over-year with a 15.6 percent operating margin. Industry Standard Servers revenue was up 7 percent, storage revenue was flat, Business Critical Systems revenue was down 9 percent, networking revenue was down 11 percent and technology-services revenue was down 5 percent.
  • Enterprise Services revenue was down 11 percent year-over-year with a 3.0 percent operating margin. Application and Business Services revenue was down 11 percent, and Infrastructure Technology Outsourcing revenue declined 11 percent.
  • Software revenue was down 5 percent year-over-year with an 18.0 percent operating margin. License revenue was down 16 percent, support revenue was flat, professional services revenue was down 7 percent, and software-as-a-service (SaaS) revenue was flat.
  • HP Financial Services revenue was down 8 percent year-over-year with a 1 percent decrease in net portfolio assets, and a 14 percent increase in financing volume. The business delivered an operating margin of 11.2 percent.

Second Quarter and Full-Year Outlook

HP notes that the U.S. dollar has strengthened considerably since it last provided its fiscal-year 2015 outlook in November 2014.  It says that, as is the case with many U.S.-based companies, this currency challenge is having a significant impact on its financial outlook.

For the fiscal 2015 second quarter, HP estimates net earnings per share (EPS) to be in the range of $0.57 to $0.61, reflecting an estimated currency impact of $0.09. For full-year fiscal 2015, HP estimates net EPS to be in the range of $2.03 to $2.23, reflecting an estimated currency impact of $0.30.

“While we were able to manage the impact of currency in the quarter and deliver earnings as expected, we believe the impact on FY15 will be significantly greater than we anticipated in November (2014),” HP’s Whitman commented.  “We’ll work hard to offset these impacts through re-pricing and productivity, but fully mitigating currency movements of this size would require reducing investments and mortgaging our future. We won’t do that.”

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