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HP net earnings decline 32 per cent in second-quarter

Net debt drops from $2.9bn to $1.8bn

Hewlett-Packard Company (HP), the world’s biggest PC maker by shipments, has reported a 32 per cent dip in net earnings in the second quarter ended 30 April 2013, as revenue slipped across its divisions.

Net income during the second quarter of 2013 was $1.07bn or 55 cents a share (2012: $1.59bn or 80 cents a share) , while operating profit was 87 cents a share, ahead of Wall Street expectations of 81 cents.

Net revenue fell by 10 per cent to $27.6bn (2012: $30.7bn).

Meg Whitman, president and CEO of HP, said the company's better-than-expected earnings for the quarter were due to  better-than-expected performance in enterprise services and printing, besides savings from restructuring programme  and improvement in  operations.

During the quarter, revenue of the  personal systems division had the steepest fall of 20 per cent year-over-year  with an operating margin of 3.2%; revenue of printing division had the smallest decline of  1 per cent year-over-year but had a strong operating margin of 15.8%; revenue of enterprise group was down 10 per cent with a 15.9% operating margin; enterprise services had seen a revenue dip of 8 per cent with an operating margin of 2.6 per cent.

Meg Whitman, president and CEO of HP, said: “I am encouraged by our performance in the second quarter, and I feel good about the rest of the year. As I have said many times before, this is a multi-year journey.”

HP expects GAAP EPS on diluted basis to be in the range of $0.56 to $0.59 for the third quarter of fiscal 2013.

Cash flow from operations grew by 44 per cent to $3.6 billion (2012: $2.5bn). Apart from paying $1.1bn in cash to shareholders in the form of dividends and share repurchases, the company also improved its net debt position by $1.8bn during the quarter, which is the fifth consecutive quarterly reduction of over $1bn.

HP’s net debt dropped from $2.9bn to $1.8bn and Whitman expects it to be almost zero by the end of this fiscal.

Whitman added: “After returning more than a billion dollars to shareholders through share repurchases and dividends in the quarter, we improved our operating company net debt position for the fifth successive quarter. By the end of fiscal 2013, we expect our operating company net debt to be below pre-Autonomy levels and approaching our goal of approximately zero.”

Meg Whitman, who took over as the CEO of the company, has been trying cut down the shrinking sales and revitalize its former strong growth following years of turbulence.

As part of the turnaround plan, Whitman has taken measures such as cost management, expansion into newer markets and into areas with long term potential and higher margins such as enterprise computing services, and layoffs.

Over the next two years, the world’s largest PC manufacturer is planning to lay off 29,000 employees and so far has cut down 18,000 jobs.