Computer industry bellwether Hewlett-Packard reported a three per cent drop in revenue as its major lines of business continued to be hammered by the global recession.
The company remained profitable, however, posting results that were in line with analyst expectations. HP recorded a profit of US$1.7 billion on sales of $27.4 billion. Earnings per share were $0.70 for its second fiscal quarter, ended April 30.
In a hopeful sign, the company reaffirmed its earlier guidance for fiscal 2009, saying it expected to earn between US$3.76 and $3.88 per share for the year. That's better than analysts had been expecting. In a Thomson Financial survey of 26 financial analysts, the consensus estimate was $3.71 for the year. However, the company was pessimistic on revenue for the year, saying it would be down by four per cent to five per cent. Last quarter, HP had said it expected revenue to be down between two per cent and five per cent.
The quarter's revenue drop would have been much worse had HP not seen its services sales nearly double, year-over-year, thanks to the company's Aug. 26 acquisition of Electronic Data Services (EDS). Services revenue was up 99 per cent, totaling US$8.5 billion for the quarter.
HP is in the process of cutting 24,600 EDS jobs as it absorbs the computer services giant. The company's EDS integration is "tracking ahead of schedule," HP said in a statement Tuesday.
Everywhere else, however, the numbers reflected the global slowdown: storage revenue was down 22 per cent; midrange server revenue dropped 21 per cent; and sales of the company's industry standard servers and business critical systems were both down 29 per cent.
Sales of desktop PCs dropped 24 per cent, notebooks were down 13 per cent and revenue in the company's printer division was down 23 per cent.
HP posted disappointing earnings last quarter as well, as revenue dropped in all of its business units. Chairman and CEO Mark Hurd responded by imposing wage cuts across the board at HP. He cut his own salary by 20 percent and those of HP's top executives by 15 percent. The company's remaining executives saw a 10 percent wage cut while all other salaries were slashed by 5 percent.
Other than the EDS reductions, however, HP has avoided widespread layoffs. In a February 18 memo to employees, Hurd said, "I don't believe a major workforce reduction is the best thing for HP at this time."