‘Room for improvement’, says new HP boss

18 May 2005

Despite reporting what he described as a “solid quarter” the new man at Hewlett-Packard’s (HP) helm CEO Mark Hurd warned that the company’s second-quarter performance “leaves room for improvement in many of our businesses.” The company reported a 7pc year-over-year rise in Q2 revenues to US$21.6bn.

For the Q2, HP reported a non-GAAP (generally accepted accounting principles) operating profit of US$1.3bn and earnings per share of US$0.37, up from US$0.34 a year ago. The company said it had to take a US$107m adjustment on its operating profit on an after-tax bases. Otherwise GAAP operating profit for the quarter was US$1.2bn.

Commenting on the company’s Q2 performance Hurd, who took over from ousted former CEO Carly Fiorin in recent months, said: “HP had a solid quarter. We grew revenue 7pc, non-GAAP earnings per share rose 9pc and we generated US$2.4bn in cash flow from operations.

“Nevertheless, our overall performance leaves room for improvement in many of our businesses. We expect to provide details as soon as our plans are finalised that will move us toward that objective.”

During the quarter, on a year-over-year basis, revenue in EMEA grew 10pc to US$9.1bn, in Americas grew 4pc to US$8.8bn and in Asia Pacific grew 9pc to US$3.6bn. On a consolidated basis, when adjusted for the effects of currency, Q2 revenue grew 4pc year over year.

HP’s Personal Systems Group grew revenue 6pc year over year to US$4.6bn, with unit shipments up 12pc and an operating profit of US$147m, up from a profit of only US$44m a year ago.

The company’s bellwether imaging and printing group saw revenues rise 5pc to US$6.4bn. Operating profits in this division were down to US$814m, driven by a charge of US$71m in workforce reduction costs, hardware pricing actions, hardware growth and mix shifts within supplies.

The company’s Enterprise Storage and Servers division reported revenues of US$4.2bn, up 6pc on the year and a profit of US$184m, up from a profit of US$119m in the previous year.

HP’s Services division grew revenue 14pc to US$4bn. However, operating profits was down to US$292m from a profit a year ago of US$332m. This decrease was driven by a US$74m charge for workforce reduction costs. The company’ Software and Financial Services divisions both reported substantial revenue and operating profit increases.

In looking ahead to the third quarter, HP predicts revenues will be in the range of US$20.3bn to US$20.7bn, but expects to take a charge of around US$100m in workforce reductions.

By John Kennedy