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HP Profit Falls 44% On Lower Sales, Margins

HP Profit Falls 44% On Lower Sales, Margins
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2/22/2012 5:52 PM ET

Computer and printer maker Hewlett-Packard Co. (HPQ: Quote) said Wednesday after the markets closed that its first quarter profit fell 44% from last year, hurt by lower sales and weaker margins.

The company's quarterly earnings per share, excluding items, came in above analysts' expectations, but its quarterly revenue fell short of analysts' forecast.

At the same time, the Palo, Alto, California-based company forecast second quarter earnings below analysts' current consensus estimate. However, the company maintained its earnings outlook for the full fiscal year 2012.

HP shares are currently down 0.86% in after hours trading after closing the day's regular trading session at $28.94, down 42 cents or 1.40%. The shares trade in a 52-week range of $21.50 to $43.86.

This was the first full quarter in charge for Meg Whitman, who succeeded Léo Apotheker as HP's chief executive last September.

The company generated lower sales in all geographies, while three of its major business groups had lower revenues during the quarter.

GAAP operating margin for the quarter decreased to 6.8% from 10.5% a year ago, while non-GAAP operating margin fell to 8.6% from 12.4% last year.

First quarter revenue in the Americas fell 9% year-over-year, while revenue from Europe, the Middle East and Africa declined 4% and. Asia Pacific revenue slipped 10% as compared to a year earlier.

Revenue from the company's international business constituted 66% of the total revenue in the first quarter. Revenue from the so-called emerging markets of Brazil, Russia, India and China fell 13% over the prior year period and accounted for 10% of total revenue.

First quarter revenue from HP's Personal Systems Group dropped 15% year-over-year to $8.9 billion. For the quarter, Notebook and Desktop revenue fell 15% and 18%, respectively. In August, HP announced strategic alternatives for this business, but later decided to keep it following a review.

Worldwide PC shipments fell a bigger-than-expected 1.4% to 92.2 million units in the fourth quarter of 2011, according to preliminary results released last month by market research firm Gartner, Inc. (IT).

HP continues to be the world's largest PC maker. It had taken the world PC lead from Dell Inc. (DELL) in 2006.

Revenue from HP's Imaging and Printing Group fell 7% from a year earlier, while revenue from its Enterprise Storage, Servers and Networking group slipped 10%.

First quarter revenue from the company's software business surged 30% from last year, boosted by last year's acquisition of U.K. Software firm Autonomy Corp.

Services revenue for the quarter grew 1%. HP acquired Electronic Data Systems Corp. in 2008 to bolster this business.

During the first quarter, HP repurchased about 29 million shares of common stock for $780 million and ended the quarter with $8.2 billion in gross cash.

For the first quarter, HP reported GAAP net income for the first quarter of $1.5 billion or $0.73 per share, compared to $2.6 billion or $1.17 per share for the year-ago quarter.

Excluding amortization of purchased intangibles, restructuring charges and other items, non-GAAP net income for the first quarter fell to $1.8 billion or $0.92 per share from $3.0 billion or $1.36 per share in the prior year quarter.

On average, 29 analysts polled by Thomson Reuters expected the company to earn $0.87 per share for the first quarter. Analysts' estimates typically exclude special items.

HP, which is the world's largest technology company by revenue, said net revenue for the first quarter fell 7% to $30.04 billion from $32.30 billion in the same quarter last year. Twenty-eight analysts had a consensus revenue estimate of $30.71 billion for the first quarter.

Looking forward to the second quarter, HP forecast GAAP earnings of $0.68 to $0.71 per share and non-GAAP earnings of $0.88 to $0.91 per share. Analysts currently expect the company to earn $0.95 per share for the second quarter.

The company reiterated its full year fiscal 2012 outlook of GAAP earnings of about $3.20 per share and non-GAAP earnings of at least $4.00 per share. Analysts currently expect the company to earn $4.08 per share for the fiscal year 2012.

Rival Dell Inc. (DELL) on Tuesday reported an 18% drop in fourth quarter profit, as higher expenses more than offset a modest 2% increase in revenue. The company's quarterly earnings per share, excluding items, also came in below analysts' expectations. At the same time, the Round Rock, Texas-based company gave a downbeat revenue forecast for the first quarter.

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by RTT Staff Writer

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