HP's revenue falls to $31.6bn after difficult second quarter

HP has announced a fall in revenue and profits for its second quarter and revised down its outlook as the global market for PCs continues to weaken.

The technology giant announced revenue of $31.6bn (£19.5bn), down from a first quarter figure of $32.3bn. Profit has also fallen since HP’s first quarter, from $2.6bn in January to $2.3bn currently.

The computing giant was also forced to revise down its outlook for the year to reflect “an expected near-term impact from the Japan earthquake and related events, continued softness in sales of consumer PCs, and reduced operating profit expectations for Services”.

It also predicted a drop in revenues for the third quarter to between $31.1 billion and $31.3 billion.

HP’s Personal Systems Group is struggling the most, according to the financial data, with a five per cent drop in revenue year-on-year.

However, there was some good news for the firm, with year-on-year revenue increasing in Q2 by three per cent.

Meanwhile, other HP divisions have also grown in the past year, with HP software and services increasing by 17 per cent in revenue, and the servers, storage and networking division seeing a 15 per cent leap in revenue.  

The financial results were announced a day early after a leaked memo by the firm’s chief executive Leo Apotheker, revealed a “tough quarter” lay ahead.

The memo, which was seen by the Wall Street Journal yesterday, sent share value tumbling because it asked HP’s senior executives to cut back expenses and slow their hiring plans.

HP said it had no comment to make on the matter.

James Governor, RedMonk analyst, said HP faces some tough challenges ahead.

"HP is the biggest PC supplier on the planet and as we all know they are not the hottest category now," he said.

Governor added that HP needs to be clearer its services strategy.

"It's signed some astounding deals recently, such as with Centrica for £250m, but in my view the firm needs more of a vision about what services actually mean," he said.

"IBM's smarter planet initiative has driven strong sales in the public sector but HP does not have this kind of vision for massive change. HP's evolution of the services business is a few years behind IBM's and it needs to work on that."

Governor added that balancing both the consumer and enterprise market is a difficult task.

"HP is trying to make the Pavilion business a success so they are spending money on it, but selling to the consumer and enterprise is not easy. Just look how Cisco entered the consumer market when it bought the Flip video operation but had to can it shortly after," he said.

"Some enterprise providers like EMC, IBM and Oracle have been turning out impressive numbers in the down turn. On the other side Cisco and HP have had problems."