HP earnings continue fall in Q4

HP earnings continue fall in Q4

Sales figures for computer and printer maker Hewlett-Packard continue to fall, as the company reported a continued decline for its fourth quarter while continuing to defend its proposed merger with Compaq.

Net profit was $US97 million for the quarter that ended on October 31, as compared to $922 million for the fourth quarter of last year, the company said in a statement.

Net revenue fell to $10.9 billion in the fourth quarter, down 18 per cent from $13.3 billion year-on-year, HP said.

"Results were driven by excellent execution in imaging and printing and good performance in services. While overall computing systems results remain weak, we saw improvement in certain segments, including storage and PCs," said Carly Fiorina, HP's chairman, CEO and president.

Fiorina reiterated that HP was not expecting any improvement in the market any time soon. "For some time, we have said that we do not expect recovery in the first half of 2002 and we now do not foresee any recovery even in the second half of 2002.

"Due to normal seasonality, we expect revenue to be down somewhat in the first quarter of 2002," while gross margins are expected to be flat, "reflecting an intensely competitive environment", Fiorina said.

"Companies continue to be cautious about their IT spending, though people are becoming more adjusted to this environment."

HP saw revenue decline in every region from the same quarter last year said Bob Wayman, HP's executive vice president and chief financial officer.

Revenue from the imaging and printing systems division, including laser and inkjet printers, imaging devices and associated supplies, declined by 9 per cent compared to the fourth quarter of last year though it was up by 16 per cent compared to the previous quarter, Wayman said.

Revenue in HP's computing systems segment division, including its desktops, notebooks, mobile devices, Unix and PC servers, as well as storage and software products, was down by 31 per cent compared to the fourth quarter of 2000, and also down by 1 per cent compared to the third quarter of 2001, Wayman said.

Profitability in its software division "remained poor", according to Wayman. "We do not break out the numbers themselves other than to say, we are losing money in our software business," Wayman said.

Overall revenue for HP's IT Services segment, including its financing business, was up by 2 per cent year-over-year and up 2 per cent compared with the third quarter, Wayman said.

Fiorina defended HP's proposed merger with Compaq by directly addressing the recent and highly public opposition to the merger from the families of the late HP co-founders. Most damaging was the decision by the children of HP co-founder William Hewlett -- Walter B. Hewlett, Eleanor Hewlett Gimon and Mary Hewlett Jaffe -- along with the William R. Hewlett Revocable Trust and the William and Flora Hewlett Foundation, to all vote against the merger.

"Despite the actions by some individuals, it is far too early for speculation that this merger will not occur. It is important to remember that the approval of the merger is a process and we're not even halfway through that process," Fiorina said.

Though David Packard Jr, son of HP's other co-founder, said that he intends to join the Hewlett family in opposing the merger, he does not speak for the David and Lucile Packard Foundation, which is HP's largest stakeholder with an ownership share of over 10 per cent, and which has yet to take a stance on the merger.

"Though the Packard Foundation can comment for themselves, it has engaged itself in quite a deliberate fashion. We have met with them and with other investors and we will continue to meet with them. I would guess that they will announce a decision sometime in December or January," Fiorina said.

"The barrage of media attention [about the Hewlett family's opposition] has been a distraction to employees. As for our customers, they are more concerned with the things that affect them every day, and those are the fundamentals."

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