May 22, 2015
HP announced its second quarter results, which included net revenue of $25.5 billion (€23.1 billion), a seven percent fall from the year before, as well as cash flow of $1.5 billion (€1.3 billion), a fall of 51 percent year-over-year, while net income fell 21 percent to $1 billion (€906 million). Despite these results, the OEM stated that its separation into two companies – HP Inc. and HP Enterprise – “remains on track”, with an expected cost to operations of around $400 million to $450 million (€362 million to €407 million).
In terms of product segments, printing revenue fell seven percent as hardware units fell four percent, and despite commercial hardware increasing by one percent, consumer hardware fell by six percent, and supplies revenue fell five percent. In other units, Personal Systems revenue fell by five percent, Enterprise Group revenue fell one percent, Enterprise Services revenue fell 16 percent and software revenue fell by eight percent.
Alongside the results, HP confirmed that Cathie Lesjak would become Chief Financial Officer (CFO) of HP. Inc., Tim Stonesifer CFO of HP Enterprise, Chris Hsu Chief Operating Officer at HP Enterprise, and Alan May Head of Human Resources at HP Enterprise.
The New York Times reported that sales “fell short” of analysts’ expectations, referring to the “shifting technology landscape” and the fact that HP’s businesses “have been battered over the last several years”. It added that while HP Inc. and Enterprise might “allow each entity to discover new opportunities and reduce costs”, investors are questioning “whether the split will slow HP’s production creation and sales […] and whether competitors will exploit customer confusion to seize market share”.
The newspaper also noted that “since announcing the plan to split, HP has reported declining profit”, and Edward Jones Analyst Bill Kreher commented that HP’s results “illustrated that the company continued to perform while revenue was getting hurt […] likely [the split] helps speed up decision making, but I still believe that the turnaround will continue to require not only solid execution but a lot of patience”.
Toni Sacconaghi, Analyst at Sanford C. Bernstein, added that while the earnings were “fine”, and the split “would give each entity a chance to pursue different financial strategies […] at the end of the day, the two halves would be essentially the same company with some additional costs. There’s no magic about cutting an apple in two. It’s still an apple in two pieces. It’s not going to become bigger overnight”.
CEO Meg Whitman stated of the results: “I’m pleased with where we ended the quarter, the continued success of our turnaround, and the progress we’re making on separation. Despite some tough challenges, we executed well across many parts of our portfolio, sustained our commitment to innovation, and delivered the results we said we would. HP is becoming stronger as we head into the second half of our fiscal year and separation in November.”
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