HP squeezes profit despite poor PC sales

HPHewlett Packard reported net income of $1.39 billion for its third fiscal quarter. HP’s revenue fell eight percent to $27.2 billion, down from $29.7 a year ago. It wasn’t all bad news though. The company managed to post a profit of $1.39 billion, or 86 cents per share, barely beating Wall Street expectations which hovered around 85 cents.

Revenue fell across the board, but the PC business took the biggest hit. HP mitigated the effects of the downturn by cutting costs and focusing on more profitable niches. As a result, its expenses were down 34 percent last quarter, to $25.3 billion, down from $38.5 billion last year. The PC slump is here to stay and HP’s cost cutting seems to be paying dividends, quite literally.

PC revenue was down 11 percent, printer revenue was down 4 percent, while servers, storage and networking were down nine percent. Business services were also down nine percent, financial services took a six percent hit and only HP’s software business ended in the red, up one percent.

HP shares fell three percent following the news, but the company managed to end the day on a positive note. It raised its outlook and now it expects full year earnings in the $3.53 a share to $3.57 share range, up from $3.50 to $3.60.

CEO Meg Whitman told investors that year-on-year revenue growth remains unlikely.

“This is a five-year turnaround with milestones along the way. … We need to accelerate into the next turn,” Whitman said.

Although HP’s PC unit took a big hit, in the big scheme of things it did not underperform, as all PC vendors except Lenovo are going through a rough patch. Some are in much worse shape than HP. However, HP still looks relatively weak on the mobile front. The company ditched the smartphone business a few years ago and its first crack at the tablet market was a flop. However, in recent months it announced several interesting tablets and hybrids, so there’s still hope it could gain a foothold in the tablet market.