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HP Q2 revenues leap like a dachshund
What to compare?
A year has passed since Hewlett-Packard bought Compaq, and the end results are still hard to measure.
HP churned out $659 million or $0.22 earnings per share on $18 billion in revenue for the second quarter. This compares to $252 million or $0.13 earnings per share with revenue of $10.6 billion in the same quarter one year ago. The 2002 second quarter results don't include figures from our friends at Compaq.
In its earnings announcement, HP decided to compare this quarter's $18 billion in revenue with the $17.9 billion in revenue reported in the prior quarter. Usually, analysts prefer to compare year-on-year numbers, but the HP/Compaq union has made things difficult.
CEO Carly Fiorina explained this decision during a conference call with analysts.
"Year-over-year comparisons are less relevant because HP and Compaq were separate companies with competing product lines, Fiorina said.
Fiorina then made an uncharacteristic turn, launching an invective against comptetitors IBM, Sun, EMC and Dell.
IBM's services business declined sequentially, she said. Sun's enterprise business has suffered from one quarter to the next, she said. The listing continued for some time.
All in all, HP wants to assure investors that it stacks up well against the competition in the near term. This method of measure, however, is not wholly satisfying, as it does not take into account each vendor's seasonal trends.
HP was willing to make year-on-year comparisons for the shining stars in its product line such as imaging and printing products and OpenView software. Compaq did not have competing products in these segments, which makes year-on-year comparisons fair game, Fiorina said.
HP trimmed losses in its enterprise hardware business down to $7 million from $83 million in the previous quarter. High-end Superdome server sales were up in the quarter, while midrange and low end system sales slowed.
The PC unit saw overall sales slide and a fall in profits from $33 million in the first quarter to $21 million in Q2. Profits rose to $918 million in the printing and imaging business, while the services group saw profits fall to $301 million down from $341 million in Q1.
As you may have guessed, year-on-year business segment comparisons were not provided.
HP cut 2,300 jobs last quarter and will cull another 3,500 workers by October. It has, however, doled out a company-wide raise for the first time in two years.
HP executives were reluctant to speculate about third quarter results but backed analyst estimates for the second half of the fiscal year of $36.4 billion in revenue or $0.62 earnings per share.
The company hopes to make gains in the mobile computing, tablet PC and printing and imaging markets. Fiorina is convinced that HP can add more technology expertise than Dell in these areas where users are willing to pay a little more for the latest and greatest technology.
"I think we can absolutely out innovate (Dell) and that is why we are out growing them in notebooks," Fiorina said. "We are lengthening our lead there, and that is a more profitable segment."
HP will jostle back and forth with Dell as the leading PC seller for some time, Fiorina said.
"We don't think the number one position on a worldwide basis is the right goal," she said. ®