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Hewlett-Packard shares fell by more than 2 percent as the company’s third-quarter revenue and fourth-quarter profit guidance fell short of Wall Street expectations.
The shortfall overshadowed HP’s third-quarter profit beat. HP said it earned 88 cents per share on revenue of $25.3 billion. Analysts surveyed by Thomson Reuters had called for HP to post earnings of 85 cents per share on revenue of $25.4 billion. Net profits, at $854 million, fell 13 percent year-on-year. Revenue fell 8 percent.
HP’s guidance for the fourth quarter — its final as a single company — also fell short of expectations. HP said it expects to earn between 92 cents and 98 cents a share, versus the $1 analysts had expected. The company also tightened its outlook for the full year, saying it expects to earn between $3.59 and $3.65 a share, versus its previously given range of $3.53 to $3.73 per share.
Revenue in nearly every business unit was down across the board with one exception. Sales of personal computers to consumers and businesses fell 13 percent from a year ago to $7.5 billion, and unit sales fell 11 percent. Printing revenue fell 9 percent to $5.1 billion. Total revenue for the combine personal systems and printing units — which will in a few months become HP Inc. was $12.6 billion, down 11.5 percent from the year-ago period. Sales in the Enterprise Group rose 2 percent year-on-year to $7 billion. Enterprise Services, the IT outsourcing unit, fell 11 percent to $5 billion. Software sales fell to $900 million down 6 percent.
The company exited the quarter with $17.4 billion in combined cash, cash equivalents and short-term investments after accounting for the debt it carries as part of its financing operations.
The effect of currency exchange rate hurt HP’s overall sales. While sales fell by 8 percent overall, the company said that after adjusting for the effect of currencies, sales would have fallen by 2 percent.
Here’s another way to look at that currency effect: Sales of HP’s industry standard server business — the portion of its servers that run standard chips — rose by 8 percent but after adjusting for the effect of currency exchange rates, would have risen by 15 percent.
In an interview CEO Meg Whitman called the business a bright spot that gives her an optimistic outlook for Hewlett-Packard Enterprise when it begins operations in a couple months. “I don’t think the strategy we’ve put in place will change much, after we separate,” she said.
When the separation happens, she said the two companies will maintain commercial agreements that will allow them to deal with shared customers as one. When a customer is buying servers and also needs to printers and PCs, they’ll jointly work on a bundled deal, much as they do today she said.
There are a few more steps remaining in the separation process, Whitman said. Both companies will have to do an investor roadshow to present themselves to shareholders. Current HP shareholders are expected to get shares in both companies. Executives from both — Dion Weisler will be CEO of HP Inc. — will undertake a “road show” starting Sept. 15 to present their outlook to investors so they can evaluate their options.
This article originally appeared on Recode.net.
