HP's profits fell by 32 percent to $1.1bn in the second quarter of 2013 – compared with $1.6bn for the same period last year – as chief executive Meg Whitman continues to face a tough task turning the firm’s fortunes around.
Despite it being lower than last year, the $1.1bn profit is perhaps better than it first appears as it came from revenues of $27.6bn, a figure that’s down from $30.7bn in the same period last year, a fall of 10 percent. As profits fell far less than revenues, it suggests that the firm is operating more efficiently. These figures also beat analysts' estimates for the quarter.
Most of the firm's key divisions saw revenues slump, though, with its PC division falling from $9.4bn in Q2 2012 to $7.5bn this quarter, while sales fell from $6.4bn to $5.9bn for its enterprise services.
However, printing showed a slight improvement, up $0.5bn to just over $6bn while its software division, while down year on year at $941m, was up on the previous quarter in 2013 from $926m.
Despite the overall slump investors appear satisfied with the improvement in relative profits versus revenues, with share rising 10 percent in trading after the financials were announced.
Chief executive Meg Whitman was upbeat that the firm was improving in numerous areas, citing printing as an area she was “feeling really good about” due to its improvement.
“We sustained a strong performance in the first quarter, with margins up. We’re seeing business initiatives gain strength in market and demands for new products outstrip supply, despite ramping production,” she said.
Whitman admitted issues remained, though, with some business units facing tough trading conditions, and this could well continue to affect HP for the rest of the year. “As we enter second half of fiscal 2013, the economy in Europe continues to be a challenge and China is slowing down as well,” Whitman added.
Tom Reuner, principal analyst at Ovum, said the results were proof Whitman’s plans were having some impact. “Slightly beating HP’s guidance should not be misunderstood as turnaround but as an improvement in its operational efficiency," he said.
"Margin improvement and an improved guidance for the rest of the year are a sign that the restructuring measures are starting to show results. Equally an improvement in printing and enterprise services is contributing to a stabilising of HP’s performance."
However, Reuner said that HP still faces a challenge to convince the market of its new strategy for the future. “HP’s suggested shift to a ‘new style of of IT’ that encompasses mobile, social, big data and cloud is not yet central to the restructuring of HP. The focus is rather on improving operational efficiency,” he said.
“While the ‘new style of IT’ will help to redefine HP’s strategy in the medium to long term, the company needs to refine its communications around how it will differentiate around these industry trends.”
V3 recently spoke with chief operating officer at HP, Bill Veghte, for an in-depth look at HP's new strategy on issues of devices, security and the cloud for the V3 Tablet App. This can be downloaded free by registering on the V3 website.
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