Profit plummet for HP

Hewlett-Packard saw profits shrink by 13% in its most recent financial quarter, from $2.1 billion last year to $1.9 billion.

Combined revenues grew by just 1% during the first quarter of the financial year, ending 31 January 2009, to $28.8 billion. That was around $3 billion short of analysts’ expectations.

Healthy revenue growth of 11% in the US was offset by a 3% fall in sales in Europe, the Middle East and Africa, down to $12 billion, and a 11% drop to $4.4 billion in Asia-Pacific.

HP’s sharp decline in earnings is testament to the company’s dependency on its printer and ink division. Revenues for the unit, which normally contributes around 40% of HP’s profit, fell by 19% to $6 billion.

The company was also blighted by a worldwide decline in PC shipments, already seen in Microsoft’s numbers. PC revenues fell by 19% to $8.8 billion during the quarter. Unlike Microsoft, HP did not attribute this drop to the growing popularity of ‘netbooks’.

The services division doubled revenues to $8.7 billion, thanks to the acquisition of EDS last year. The company revealed that it has already cut 9,000 of the 24,600 jobs it plans to axe following the acquisition, plans against which HP/EDS employees protested across the world earlier this month.

"In the past, the printer and ink division has probably been the crown jewel of Hewlett-Packard, but today we’ve got another one, and that’s services," HP CFO Cathie Lesjak told Associated Press.

HP predicted a revenue decline of between 2% and 3% in the coming year. That precipitated a 6% fall in the share price.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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