Hewlett Packard disappointed the market this week with a 13 per cent drop in profits for its second quarter ended 30 April.
The size of the drop surprised analysts and investors. Revenue increased 16 per cent on 1997 to $12 billion but profits were down to $685 million compared to $784 million for the same quarter last year. In a statement the company said earnings performance was well below expectations.
"Profitability was down compared to the year-ago quarter because of pricing pressure in PCs, troubled Asian economies and our unacceptable operating expense growth," said Lewis Platt, HP chairman, president and chief executive officer.
The drop compares with the previous year in which both revenue and profits rose by more than 10 per cent.
The second quarter saw Asia-Pacific revenues up by only one per cent compared to 20 per cent growth in the US. PCs and Unix servers had strong growth in terms of unit sales but suffered falls in marginal revenues.
Strong margins from sales of fully configured systems helped make up some shortfall. Printers, storage and software - particularly the Openview systems management product - were the usual strong performers, the company said.
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