HP Faces Trouble on Every Side Ahead of Earnings Report
When it reports quarterly earnings on Wednesday, Hewlett-Packard will give the latest update on efforts by CEO Meg Whitman to turn the troubled technology giant around.
After last week’s huge earnings miss by Dell and news last month about the first earnings miss in eight years by IBM, it’s hard to imagine a scenario where HP’s circumstances look any rosier than they did three months ago. Whitman and CFO Lesjak will probably make an effort to remind shareholders and analysts that the turnaround they’ve been promising isn’t expect to become apparent until sometime in 2014.
Analysts are expecting HP to report per-share profits of 81 cents on sales of $28.1 billion and to forecast earnings of 84 cents or better on sales of $27.8 billion for the quarter ending in July.
Here’s the rundown of rough spots hitting other companies that will probably factor in to HP’s results:
- PCs: Sales of personal computers are showing the largest declines since records have been kept. HP remains the world’s largest vendor of PCs, which accounted for more than 28 percent of sales last quarter. Especially aggressive pricing by Dell hasn’t helped.
- Printers: The other category where HP leads the world, its printing business, accounted for $5.8 billion or more than 20 percent of revenue last quarter. Weak results from Lexmark and Xerox don’t augur well for HP generally. A recent product refresh by HP might help a little.
- Enterprise: Server sales are likely to be under pressure along with PCs and printers. Dell executives including CEO Michael Dell have been talking publicly about how Dell the company appeared to gain share in recent reports by IDC and Gartner. On Wednesday we’ll see if they’ve been speaking too soon. If they are, then expect weak results from the Enterprise Group, which accounted for 24 percent of HP’s sales last quarter.
- Enterprise Services: HP has been re-investing in the services group, the group largely made up of the former technology services firm EDS, and those investments aren’t expected to pay off anytime in the near future. As Chris Whitmore of Deutsche Bank Securities wrote in a note to clients today, “Increasing the size and depth of HP’s Services bench will likely take multiple quarters before translating into improving market share performance. As a result, we continue to expect a long, slow turnaround.” The unit accounted for more than 20 percent of sales last quarter.