Hewlett Packard's final quarter showed revenue pressure
SAN FRANCISCO — Hewlett Packard issued a financial swan song Tuesday: final combined results for the two companies it separated Nov. 1 — its PC-and-printer company, HP Inc., and Hewlett Packard Enterprise.
Bottom line: Revenue for both organizations in the fiscal fourth quarter was down, year-over-year, and profits were at the low end of analysts' estimates, necessitating the need for the 76-year-old computing pioneer to splinter. The combined company has reported a revenue decline in 16 of the past 17 quarters.
Overall, HP reported a 9% drop in revenue to $25.7 billion and non-GAAP earnings per share of 93 cents. (HP operated as a combined company through Oct. 31.)
Financial analysts polled by Thomson Reuters expected a 7% decline in revenue and earnings of 97 cents per share, down 8% year-over-year.
The quarter underscores "a new era of HP innovation," HPE CEO Meg Whitman said of the results, announced after markets closed. She said later in an interview with USA TODAY that revenue for both companies should grow on a "constant currency basis."
HP's decision to split into two smaller, simpler companies — albeit $50 billion organizations that each qualify as a Fortune 50 company — is a powerful nod to the shrinking PC market and the emergence of new rivals such as Amazon in growing enterprise technologies like cloud computing.
Meg Whitman's hardest act in tech: Splitting HP
Since the official split more than three weeks ago, HPE (HPE) shares have tumbled 8% to $13.85. Shares of (HPQ), which sells PCs and printers, have surged 16% to $14.23.
Today's results had an opposite impact. In after-hours trading, HPE shares improved 3%, while shares of HPQ dipped 6%.
"The world is trying to figure out who they (HPE) are," says Tom Bittman, an analyst at market researcher Gartner.
Whitman told USA TODAY it will take a quarter or two for investors to decide. "Some will stay with both stocks, and others will choose one or the other," she said. "There should be some volatility."
Much of HPE's success will hinge on the mergers-and-acquisition strategy of Whitman, says Daniel Ives, senior analyst at FBR Capital Markets. HP's "mature tech brethren are facing hurricane-like secular headwinds," he says. "Growth is like looking for water in the Sahara Desert."
As for HP Inc., the PC business continues to be a challenge, HP Inc. CEO Dion Weisler said, as consumers increasingly use mobile devices for computing.
HP needs "sprinkles of magic," like its new Star Wars-edition notebook computer, to pump up sales, he said.
The newly created companies each face steep challenges. In addition to an ever-shifting technology landscape increasingly influenced by mobile devices and cloud computing, HPE has said it will slash up to 30,000 jobs to shed low-margin services business so it can drill down on computer security and other more profitable areas. HP Inc. will eliminate 3,300 employees and target 3-D printing and A3 copiers.
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