HP boss outlines hardware exodus in Q3 numbers

Matt Whipp
Friday, August 19, 2011

HP announced third-quarter revenues down 2% as chief executive Lo Apotheker announced a major shift to software and services that could result in its PC division being spun off.

The company's printing division added $6.1bn (£3.7bn) to the IT giant's $31.2bn net revenues, down 1% year-on-year. Sales of its commercial presses came in at $1.3bn for the quarter ending 31 July, down 7% year-on-year and 10% sequentially, although hardware units rose 1%, and sales were marginally up for the nine months.

Chief financial officer Cathie Lesjak, who described the quarter as "a tough outlook and definitely the toughest one for me as CFO", cited the situation in Japan as hampering its printing business, with the earthquake causing toner shortages and the rising yen creating "a margin headwind" that is expected to continue for some time to come.

She added that Indigo page volumes were up 23% but that "higher than normal inventory supplies, especially in inks" would remain a challenge.

However, there were much bigger changes taking place at the company as Apotheker, in the driving seat for nine months, outlined a strategy for transformation that included the acquisition of UK technology business Autonomy in a $11bn deal.

In a conference call, Apotheker, who was previously at SAP, referred often to the "tough decisions" being made in "building a successful software business".

He also announced an investigation into the future of its PC hardware division, which contributes nearly a third of revenues but operates on narrow margins, which could result in it being sold or spun off as it finds itself caught between cheaper rivals from Asia and Apple taking market share for higher-end consumer devices.

HP also intends to shut down its tablet and mobile hardware operation around its WebOS platform in Q4 which it acquired when it bought Palm following poor sales and the expectation that it would take years of heavy funding to push it to a second place market position behind Apple, which was its initial plan.

Despite slightly improving on analyst estimates for the quarter, the company lowered its fourth-quarter guidance to an upper estimate of $32.5bn. "We need to be realistic about where we are and the challenges we are facing," said Apotheker.

Shares in the company closed down slightly at $29.51 yesterday.

See also:

Commercial print volumes rocket for HP's 'solid' Q2 results

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