HP Beats Estimates, Weak Printer Demand Weighs on Forecast

25 August 2016

HIGHLIGHTS

Q3 revenue from the company's computer business rose 7.5 percent
Notebook volumes increased 12 percent
Revenue from its printer business declined 4.6 percent from Q2

HP Inc, the hardware business of the former Hewlett-Packard Co, reported higher-than-expected quarterly revenue and profit as demand recovered for its notebooks.

However, HP forecast current-quarter profit below analysts' estimates, reflecting weak sales of its printers as companies cut costs across industries. HP's shares fell nearly 6 percent in extended trading on Wednesday.

Third-quarter revenue from the company's computer business rose 7.5 percent from the second quarter as sales of notebooks improved.

From a year earlier, sales were flat in the business, which accounts for two-thirds of HP's total revenue, showing signs of recovery after a drop in the past two quarters.

Notebook volumes increased 12 percent, but the benefit was offset by weak desktop sales and low demand from commercial clients. Revenue from its printer business declined 14.3 percent from a year earlier and 4.6 percent from the second quarter.

"The markets remaining challenging and somewhat volatile," Chief Executive Dion Weisler said on a conference call. "We have more work to do."

HP said it cut about 1,000 jobs in the third quarter, taking the total number of job cuts to about 2,300 this year.

The company, which had about 287,000 employees as of October 31, said in February that it expected to slash around 3,000 jobs by the end of this fiscal year.

Weak forecast
HP forecast adjusted earnings of 34-37 cents per share from continuing operations for the current quarter. Analysts on average were expecting 41 cents per share, according to Thomson Reuters.

Net earnings from continuing operations rose more than a fifth to $843 million (roughly Rs. 5,650 crores), or 49 cents per share, in the three months ended July 31, as costs fell about 9 percent.

Excluding items, HP earned 48 cents per share, beating the average analyst estimate of 44 cents. Total revenue fell 3.8 percent to $11.89 billion (roughly Rs. 79,769 crores), but topped the average estimate of $11.46 billion. HP shares were trading at $13.60 after the bell.

Up to Wednesday's close, the stock had risen 12.5 percent since HP started trading as a separate company.

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