Computer and printer maker Hewlett-Packard Co. (HPQ) said Wednesday after the markets closed that its second quarter profit fell 32% from last year, hurt by lower revenue and weaker margins amid a slump in PC sales.
However, 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 company gave an upbeat earnings forecast for the current quarter and raised the low end of is fiscal 2013 adjusted earnings outlook range.
"We beat the upper end of our non-GAAP diluted EPS outlook for the quarter by $0.05 per share, driven by better than expected performance in Enterprise Services and Printing, coupled with the accelerated capture of restructuring savings and improvement in our operations," said Meg Whitman, HP president and chief executive officer.
HP shares are currently gaining 12.67% in after hours trading after closing the day's regular trading session at $21.23, up 12 cents. The shares trade in a 52-week range of $11.35 to $24.05.
All six of HP's reported segments recorded lower revenue for the quarter.
HP's Personal Systems revenue for the second quarter fell 20% year-over-year to $7.6 billion. For the quarter, Notebook unit sales fell 24%, while Desktop unit sales were down 18%. In August 2012, HP announced strategic alternatives for this business, but later decided to keep it following a review.
Last month, industry research firm International Data Corp. (IDC) said global PC shipments in the first quarter of 2013 fell 13.9% from last year to 76.3 million units in the first three months of 2013, the steepest year-over-year decline since the firm began tracking the PC market's quarterly performance in 1994.
Another market research first market research firm Gartner, Inc. (IT) also said worldwide PC shipments in the first quarter fell 11.2% from a year earlier to 79.2 million units, the lowest levels since the second quarter of 2009.
HP continues to be the world's largest PC maker. It had taken the world PC lead from Dell Inc. (DELL) in 2006.
Second quarter Printing revenue declined 1% from a year earlier to $6.1 billion. Revenue for the company's Enterprise Group slipped 10% to $6.8 billion in the second quarter. Enterprise Services revenue for the quarter declined 8% to $6.0 billion. HP's software revenue for the second quarter fell 3% year-over-year to $941 million, while HP Financial Services revenue dropped 9% to $881 million.
Meg Whitman, who was appointed as HP CEO in September 2011, has been making sweeping organizational changes for the past nearly one year in a bid to make HP a leaner and meaner company. In May 2012, HP said that it expected to eliminate about 27,000 employees, or 8% of its workforce as of October 31, 2011, by the end of fiscal year 2014 as part of a restructuring that is expected to generate annualized savings of $3.0 billion to $3.5 billion, majority of which will be reinvested back into the company.
HP said last month that Raymond Lane has decided to step down as chairman of the company's board of directors, a move that marks another shake-up in the computer and printer maker's beleaguered board. Lane has been under fire from shareholders for his role in HP's botched, $11 billion acquisition of U.K. software firm Autonomy Corp. in 2011. HP incurred a non-cash impairment charge of $8.8 billion in the fourth quarter of fiscal 2012 relating to the Autonomy acquisition. HP had claimed that majority of the impairment charge was linked to serious accounting improprieties, misrepresentation and disclosure failures by Autonomy.
For the second quarter ended April 30, 2013, the Palo, Alto, California-based company reported net income of $1.1 billion or $0.55 per share, compared to $1.6 billion or $0.60 per share for the year-ago quarter.
Excluding items, adjusted net income for the second quarter was $1.7 billion or $0.87 per share, compared to $1.9 billion or $0.98 per share in the prior year quarter.
On average, 29 analysts polled by Thomson Reuters expected the company to earn $0.81 per share for the second quarter. Analysts' estimates typically exclude special items.
Operating margin for the quarter narrowed to 5.8% from 7.2% a year ago, while adjusted operating margin shrank to 8.6% from 8.9 % last year.
Revenue for the second quarter fell 10% to $27.58 billion from $30.69 billion in the same quarter last year. Twenty-five analysts had a consensus revenue estimate of $28.12 billion for the second quarter.
Looking forward to the third quarter, HP forecast earnings of $0.56 to $0.59 per share and adjusted earnings of $0.84 to $0.87 per share.
For the full year fiscal 2013, the company now expects earnings of $2.50 to $2.60 per share and adjusted earnings of $3.50 to $3.60 per share. Previously, the company expected earnings forecast of $2.30 to $2.50 per share and adjusted earnings of $3.40 to $3.60 per share.
Analysts currently expect the company to earn $0.84 per share for the third quarter and $3.49 per share for the fiscal year 2013.
Arch rival Dell Inc. (DELL), which has agreed to be taken private in a $24.4 billion deal, last week reported 79% drop in first quarter profit, as revenue declined and margins deteriorated amid sluggish demand for personal computers. The company's quarterly earnings per share, excluding items, also came in way below analysts' expectations, but its quarterly revenue beat analysts' forecast.
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