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Hewlett-Packard (HPQ) 2Q Earnings Top View, To Cut 27,000 Jobs; Shares Jump

 May 23, 2012 04:16 PM

(By Balachander) Hewlett-Packard Co. (NYSE:HPQ) shares jumped 6.45 percent in extended trading after the PC maker reported better-than-expected quarterly earnings, and said it would cut 8.0 percent of its workforce or roughly 27,000 jobs. The company also raised its full-year forecast.

HP sees a pre-tax charge of about $1.7 billion in fiscal 2012 as a result of this restructuring, which should help the company to focus on segments that offer attractive growth potential.

On a non-GAAP basis, earnings per share (EPS) fell 21 percent to $0.98 from $1.24 in the same period of last year, yet topped Wall Street projections of $0.91. GAAP earnings fell 31 percent to $1.6 billion.

Revenue declined 3 percent to $30.7 billion, versus consensus estimate of a 5.4 percent decline to $29.92 billion for the second quarter.

HP's revenue has been falling for the past two quarters as dwindling sales of PCs coupled with a shortage of hard disk drives (HDD) taking a toll on its results.

The announcement of job cuts will be the biggest step taken by CEO Meg Whitman, who took the helm in September 2011 after HP abruptly ended the 11-month tenure of her predecessor, Leo Apotheker.

Segment wise, Personal Systems Group revenue was flat with desktop units rising 5 percent, while notebook units fell 6 percent. Services revenue fell 1 percent. Imaging and Printing Group (IPG) revenue dropped 10 percent and Enterprise Servers, Storage and Networking (ESSN) revenue fell 6 percent. Software revenue jumped 22 percent.

Looking ahead for the third quarter, HPQ forecasts non-GAAP EPS between 94 cents and 97 cents, below analysts' expectations of $1.02.

For the full year, the company now expects non-GAAP EPS in the range of $4.05 to $4.10, up from prior view of at least $4.00, while analysts expect $4.03. 

According to market research firm Gartner, HP's first quarter 2012 market share grew to 17.2 percent up from 15.4 percent in the fourth quarter of 2011.

The stock, which has been trading in the 52-week range between $20.57 and $21.20, ended Wednesday's regular trading at $21.08.
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