The technology leader, Hewlett Packard (HPQ, Financial), announced its second quarter results for the fiscal year 2015 on this Thursday after the market’s close. The numbers were mixed as the earnings surpassed the estimates but revenue fell slightly below the expectations. However, the stock moved upwards after the earnings release and took a move northwards soon after the Q2 earnings announcement. The Palo-Alto based software company’s number mix did excite its investors as the company gave more clarity upon the separation of Hewlett Packard into two different entities which is likely towards the later part of this fiscal year. Let’s quickly have a glance upon the quarter highlights which were the major points of discussion in the earnings call.
The quarter’s number mix
Revenue for the quarter stood at $25.5 billion, slightly below the analysts’ consensus of $25.7 billion and slid 7% year-over-year from $27.31 billion reported in the same quarter of last fiscal year. The non-GAAP diluted EPS came in at $0.87 a share, which exceeded the Street’s expectation of $0.857 a share.
In a press release, CEO Meg Whitman, stated – “HP is becoming stronger as we head into the second half of our fiscal year and separation in November…”
During the earnings call, the management stated that the separation of the legacy computer and printing business from the enterprise computing segment would cost around $400 million in dis-synergies from the split. However, this spilt would also provide opportunity for cost savings in the future fiscal years.
The company’s biggest segment, Personal systems, saw a revenue drop of 5% year-over-year to $7.74 billion. While notebook sales soared 19% year-over-year, desktop sales dropped 14% in the quarter. The revenue from the printing segment dropped 7% year-over-year to $5.45 billion. The enterprise group saw sales drop by 1% year-over-year to $6.56 billion.
Hewlett Packard’s management also announced the sell-off of the major 51% stake of its data networking business in China, H3C, to Tsinghua Unigroup. H3C makes switches and routers for consumers in the enterprise market, and has been in discussion of late since it has been attracting the attention of several companies serving the tech sector. During the discussion, the company has even revealed that this sell-off would be worth $2.3 billion. It is to be noted that HP’s networking units in China have been facing “rougher than anticipated” quarter and this move would aid in bettering its revenue from the Nation.
Besides having faced doldrums in China, the drop in revenue in most of the segments was majorly attributed to the strong dollar and currency exchange fluctuations which continue to cloud HP’s quarterly results.
Parting word
Though HP’s numbers were not that attractive in terms of the top line analysts were not too disappointed with the Q2 results. The company has taken a cautious stand with respect to the third quarter earnings as currency fluctuations continue to depress numbers in international markets. Also the sale in China is expected to bring back the good days in the Nation going forward. Let’s keep an eye on how HP’s turnaround that is currently in progress takes final shape.
