HP prints its way to profit


21 November 2002 Systems giant Hewlett-Packard (HP) swung back to profit in its fourth quarter of 2002, as the company’s headcount reduction programme kicked in and its lucrative printing and imaging division continued to deliver strong numbers.

However, the performance concealed a set of weak sales at HP’s other business lines, including enterprise systems, personal systems and IT services.

Overall, the company reported net profits for the three months ending 31 October of $390 million (€389m) compared to a loss of $505 million (€504m) in the year-earlier period. Revenues fell by 1% to $18.1 billion.

A major influence on that positive bottom line was ongoing workforce reduction. Over the past six months, as it has restructured following its merger with Compaq, the company has cut 12,500 positions. HP said it is on track to meet its target of 17,900 job reductions by the end of fiscal 2003.

Largely offsetting disappointing sales at its other divisions, HP’s printing and imaging division delivered a 12% jump in sales to $5.6 billion (€5.6bn). Operating profits rose 89% year-over-year, partly due to the seasonal impact of the start of the school year.

Elsewhere, revenues for HP’s enterprise systems business – which includes servers and storage hardware, as well as systems management and telecoms software – fell by 5% to $4.1 billion (€4.1bn). Driving down this figure was a 14% sales slump in sales of ‘business-critical servers’. On a more positive note, sales of Intel servers were up 3% over the 2001 fourth quarter. However, market research company Gartner Dataquest has said that HP is losing market share to rivals such as Dell Computer and Sun Microsystems in the worldwide server market. The division made an operating loss of $152 million (€152m), down from $270 million (€270m) in the third quarter.

HP CEO Carly Fiorina will also be disappointed by HP’s software sales, which nose-dived by 15%. Fiorina has cited high-margin software revenues as vital to the company’s efforts to re-establish growth.

Further weakness was evident at the company’s IT services division, which reported sales down 3% to $3.1 billion (€3.1bn). Again, Fiorina has highlighted HP’s ambitions in the services market as a key factor behind its acquisition of Compaq.

Meanwhile, sales of HP’s personal systems – which include workstations, notebooks, handhelds and consumer PCs – also slipped by 6% to $5.1 billion (€5.1bn) year-on-year. And revenues from storage products dropped 5%.

The company has still to publish pro-forma results for the full year.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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