Hewlett-Packard (HPQ, Financial) reported its third-quarter earnings results on Thursday, Aug. 20. For the third quarter the company reported revenue of $25.35 billion and earnings per share of $0.88. Revenue missed analysts’ consensus estimate for the quarter by $90 million while earnings per share were in line with analysts’ average estimate.
On July 1 the company filed for a separation of its enterprise business which is having an ongoing impact on its company and stock price. The regulatory filing follows an announcement of the separation in October 2014, and the separation is expected to be completed in November of 2015. Hewlett-Packard has reported it will provide additional detail and insight on its planned separation of its businesses at its HP Securities Analysts Meeting on Sept, 15.
For the third quarter the company’s enterprise business segments continued to lead with stronger growth than its struggling Printing and Personal Systems Group. The enterprise businesses overall reported revenue of $12.8 billion accounting for 49% of total third quarter revenue. The Enterprise Group specifically reported the company’s only positive revenue growth for the quarter with a gain of 2% from the third quarter of 2014. Enterprise Services reported revenue of $5.0 billion, down 11% from the comparable quarter and the firm’s Software business reported revenue of $900 million, down 6.2% from the comparable quarter.
In Printing and Personal Systems, revenue totaled $12.6 billion, down 11.5% from the third quarter of 2014. Personal Systems revenue was $7.5 billion, down 13.4% from the comparable quarter. Printing reported revenue of $5.1 billion, down 8.6% from the comparable quarter.
Following HP’s third quarter earnings, Rob Enderle of Enderle Group provided his insight on the division of the two companies in a CNBC interview. In his comments he reported that the divestiture of the two companies could make them more marketable for a potential acquisition.
After the earnings announcement the stock opened lower in trading on Aug. 21 at $26.95; however at midday it’s trading slightly higher, up 4.4% to $28.55. Since July 1 the stock price is down 5.13% and year to date it’s down 28.78%. Slowed growth in the personal computer market and increased competition from Microsoft’s (MSFT, Financial) Windows 10 have been two main factors affecting Printing and Personal Systems which has continued to report weak revenue growth. Currently, many investors are now awaiting the stock separation upon which HP, Inc., and HP Enterprise will begin to trade separately. The separation will likely help HP, Inc. to focus more directly on reviving revenue growth in its Printing and Personal Systems business. Given the weaker revenue growth in Printing and Personal Systems the HP Enterprise business will likely be the stronger of the two companies in terms of sales growth in the near term.
