HP profits drop 44 percent, CEO pleads for patience

By Lee Kaelin on February 23, 2012, 8:34 AM

Veteran Silicon Valley executive Meg Whitman pleaded for patience yesterday as she revealed that HP’s first fiscal quarterly earnings (PDF) had dropped 44% due to a decline in sales across three of its key units: personal computers, printers and enterprise equipment.

Meg Whitman took over as CEO in September from Leo Apotheker, who was fired less than a year after taking over the top role at the company. His departure rounded off a dramatic year for HP, dogged by lows which included complete strategy failures with WebOS and their TouchPad tablet, as well as the confusion around the firm’s continual indecisiveness about selling off its personal PC unit, which sent share prices tumbling.

"If you look at business history and you look at companies which have gone through the kind of turnaround that we're leading HP through right now, these things are not quick," she said, suggesting it could take as long as two to five years to fully recover. "It took us a while to get into the situation in which we find ourselves. It's going to take us a little while to get out."

The reported fiscal first quarter revenue dropped 7 percent to $30 billion, ending up slightly below estimates of $30.7 billion by Wall Street. Sales of personal computers in the personal systems group reduced by 15 percent, blamed partly on worldwide hard drive shortages caused by the flooding in Thailand last year.

Revenues from the printing group fell 7 percent, with the drop in sales blamed on weak demand as the US economy continues to struggle. HP’s sales of enterprise servers, storage and networking equipment also fell by 10 percent.

All told, Hewlett Packard reported a net income of $1.47 billion for the first quarter, around 73 cents a share, down from $2.6 billion and $1.17 a share in the same period last year. Shares dropped 37 cents to $28.60 in extended trading after the results were announced.

Underinvestment in systems and procedures made these problems even worse according to Whitman, with the natural disaster in Thailand highlighting the issues the company faces with its supply chain and operations. "We were not as effective as we needed to be in matching that supply with that demand," she said, adding that the company needs to focus on stabilizing its finances and make improvements to its operations.

User Comments: 6

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Guest said:

Quit selling crap printers, quit taking short cuts on the print drivers, and then maybe I will consider buying them again.

Guest said:

How about HP takes a page from Asus on how they offer a better warrenty and build better systems and they wouldnt have this problem. Bottom line it'll be a good day in the tech world when this big fish finally dies......

Burty117 Burty117, TechSpot Chancellor, said:

Guest said:

Bottom line it'll be a good day in the tech world when this big fish finally dies......

I dunno about that, Means Dell will be top then, would you really prefer Dell to be number one over HP?

Personally I agree though, Asus do make some quality products, even if you get a cheap Asus that feels all plastic, it still seems to survive the test of time.

howzz1854 said:

i was a long time loyal HP customer for a LONG TIME... but not anymore..... i wonder why

Guest said:

You folks really arent getting the picture...HP doesnt care about their printers/desktops/notebooks....its the enterprise hardware that is their meat and potatoes. Then, it comes along with integration services, installation services, education services which all cost money. With Intel holding off on the new Sandy Bridge chipsets, HP's bottom line got really destroyed by their inability to refresh their server line. Further to that, as most HP storage products have been built on their proliant architecture...they could not really refresh their base line storage (ie...LeftHand, MSA, NAS appliances, De-dup, blade storage, etc) furthering their inability to get this out there.

While the whole PC/Notebook spin off fiasco didnt help them, to think it is nothing more than a crappy print driver (ironically written by Canon in most cases now) or low quality PC's (which is the consumer's fault honestly in demanding lower cost and then getting pissy when the quality doesn't match) or even the Palm fiasco didn't help, there is much more to this than anyone here really understands that has posted so far.

Couple all of this in with the shift from being a hardware/service provider to (egad, thanks Leo for automony!) a software/service provider and then back to hardware again....well I would personally call past fiscal year a complete write off and not a view into what is to come.

So to all you stock holders driving the cost down further...please do so more...I want more HP stock at rock bottom. With 3PAR, Gen8 server hardware, Envy's re-emergence, Tippingpoint, structured and unstructured data management software, 3COM and some other new bits and pieces...those stocks will almost certainly rebound in a big way this next 2 years.

Sarcasm Sarcasm said:

How about building better desktops for one.

Has anybody ever seen the inside of an HP computer? Messy wiring job all over the place and budget components.

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