Computer and printer maker Hewlett-Packard Co. (HPQ) said Wednesday after the markets closed that its second quarter profit fell 31% from last year, hurt by lower sales and weaker margins.
However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue.
At the same time, the Palo, Alto, California-based company forecast third quarter adjusted earnings below analysts' current consensus estimate, but raised its full year adjusted earnings outlook.
Separately, HP said that it expects 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.
The company is offering an early retirement program, so the total number of employees affected will be impacted by the number of employees that participate in the early retirement plan.
"We are making progress in our multi-year effort to make HP simpler, more efficient and better for customers, employees, and shareholders," said Meg Whitman, HP president and chief executive officer. "This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do."
HP shares are currently gaining 8.63% in after hours trading after closing the day's regular trading session at $21.08, down 70 cents or 3.21%. The shares trade in a 52-week range of $21.28 to $37.70.
Second quarter revenue for HP's Personal Systems Group edged up 0.4% to $9.45 billion. For the quarter, Notebook unit sales fell 6%, but Desktop unit sales were up 5%. In August, HP announced strategic alternatives for this business, but later decided to keep it following a review.
Worldwide PC shipments rose 1.9% to 89.0 million units in the first quarter of 2012 from 87.3 million units in the first quarter of 2011, according to preliminary results released by market research firm Gartner, Inc. (IT) last month. Gartner had earlier projected first quarter 2012 worldwide PC shipments to decline 1.2% from a year earlier.
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 revenue for HP's Imaging and Printing Group fell 10% from a year earlier to $6.13 billion.
The company said in March that it would merge its Imaging and Printing Group and its Personal Systems Group to create the Printing and Personal Systems Group, to be led by Todd Bradley.
Revenue for the company's Enterprise Storage, Servers and Networking group slipped 6% to $5.21 billion in the second quarter. Services revenue for the quarter declined 1% to $8.83 billion.
HP's software revenue for the second quarter surged 22% year-over-year to $970 million, boosted by last year's acquisition of U.K. Software firm Autonomy Corp.
The company said Wednesday that its chief strategy officer and executive vice president of HP Software Bill Veghte will step in to lead Autonomy. Mike Lynch, Autonomy's founder and executive vice president for information management, will leave HP after a transition period.
For the second quarter ended April 30, 2012, HP reported net income of $1.6 billion or $0.80 per share, compared to $2.3 billion or $1.05 per share for the year-ago quarter.
Excluding amortization of purchased intangibles, restructuring charges and other items, adjusted net income for the second quarter fell to $1.9 billion or $0.98 per share from $2.7 billion or $1.24 per share in the prior year quarter.
On average, 25 analysts polled by Thomson Reuters expected the company to earn $0.91 per share for the second quarter. Analysts' estimates typically exclude special items.
Operating margin for the quarter narrowed to 7.2% from 9.4% a year ago, while adjusted operating margin shrank to 8.9% from 11.3% last year.
Net revenue for the second quarter fell 3% to $30.69 billion from $30.04 billion in the same quarter last year. Twenty-four analysts had a consensus revenue estimate of $29.92 billion for the second quarter.
Looking forward to the third quarter, the company forecasts earnings of $0.00 to $0.03 per share on a reported basis and $0.94 to $0.97 per share on an adjusted basis. Analysts currently expect the company to earn $1.02 per share for the third quarter.
For the fiscal year 2012, the company now forecasts reported earnings of $2.25 to $2.30 per share and adjusted earnings of $4.05 to $4.10 per share. Previously, the company forecast reported earnings of about $3.20 per share and adjusted earnings of at least $4.00 per share. Analysts currently expect the company to earn $4.03 per share for the fiscal year 2012.
Rival Dell on Tuesday reported a 33% drop in first quarter profit, as revenue declined and margins deteriorated amid slow consumer demand. The company's quarterly earnings per share, excluding items, also came in below analysts' expectations as did its quarterly revenue. At the same time, the Round Rock, Texas-based company gave a downbeat revenue outlook for the second quarter.
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