Hewlett-Packard’s (HPQ, Financial) second quarter 2015 results delivered mixed set of numbers with sales sliding 7% compared with a year earlier.Despite this, the tech behemoth’s shares rose more than 3% after the results were announced, suggesting the market took it positively. The company is a provider of software, technologies, and other solutions to individual customers, small to medium sized entities, and large corporations. Here’s a look at HP’s quarter performance and what to expect in the future.
The quarter stats
HP recorded an earnings per share of $0.87 on a revenue of $25.45 billion. This compares with $0.88 earnings per share on a revenue of $27.31 billion registered a year earlier. So HP saw a drop in both top and bottom lines during the quarter. However, the company was able to beat Wall Street earnings expectation of $0.85 a share, though it missed the revenue estimate of $25.64 billion.
The hardware company’s GAAP net earnings experienced a 21% plunge to $1 billion. It spent a massive $659 million during the quarter to buy back around 19 million shares.
The softness in the results are attributable to the company’s operating segments. Personal systems revenue fell 5%. Commercial revenue fell 7% and consumer sales dipped 2%. Printing revenue also registered a fall of 7% over last year. Overall printing hardware units declined 4%, as consumer units had fallen 6%. Revenue from Software dropped 8%, driven by poor performance in licenses, support, professional services, and HP's software-as-a-service business. HP's enterprise services sales was down 16%.
However, the enterprise group’s revenue didn’t see as deep a dip as other segments. Its revenue fell 1% over prior year period, thanks to the 11% sales gain in industry standard servers business. However, this was compensated by revenue decrease in storage, networking, business critical systems, and technology services.
HP CEO Meg Whitman admits that the company was facing “some tough challenges”, and considering them it managed to fare reasonably “across many parts of our portfolio.” HP stays committed to consistent innovation to deliver better service and results. The company feels more confident as it enters into the second half of the year, and the planned separation end this year. Whitman said, “I’m pleased with where we ended the quarter, the continued success of our turnaround, and the progress we’re making on separation.”
Looking ahead
HP informed its investors regarding the company’s separation plans. Last October, the tech giant had declared that the company will split into Hewlett-Packard Enterprise and HP Inc by end of 2015. Hewlett-Packard Enterprise will be headed by current CEO Meg Whitman. It would concentrate on servers, software and the cloud. HP Inc will be led by present executive vice president Dion Weisler. HP Inc will focus on personal computers and printers.
As far as the third quarter is concerned, the company estimates to report adjusted earnings per share in the range of $0.83 to $0.87. Analysts expect the figure to come in at $0.87. For the entire fiscal year, HP forecasts its earnings per share to come in between $3.53 and $3.73, while the Street gave an estimation of $3.64.
The company’s overall performance was good, especially after factoring in the difficult business environment. HP is also progressing toward finalizing and concluding the separation. The split should prove advantageous as a whole. The company’s guidance for the entire year is also better than what analysts had expected. This should be good news for investors and help them put fears to rest. HP’s prospects and strengths in multiple areas outweigh the weaknesses.
