Hewlett-Packard job cuts lift sharesComment on this story
San Francisco - Chief executive Meg Whitman, still struggling to turn around Hewlett-Packard, is opting for more job cuts, a move that boosted shares the most in six months.
After reporting an 11th straight quarter of declining sales, Whitman is propping up profit by paring as many as 16,000 more employees, on top of 34,000 already announced.
While she has stabilised Hewlett-Packard after years of management upheaval and presided over a 39 percent share climb since taking over in 2011, the company is facing its third straight drop in annual revenue.
Consumers are buying fewer personal computers and printers as as they embrace smartphones and tablets, and companies are opting to use more software via the Internet or building their own machines.
“The workforce reduction suggests the demand environment continues to be challenging,” said Bill Kreher, an analyst at Edward Jones & Co. who has a hold rating on the stock.
“The company is still in some very challenging businesses. The company needs to right-size the business.”
Profit excluding certain costs in the period ended April 30 was 88 cents a share and revenue fell 1 percent to $27.3 billion, the Palo Alto, California-based company said in a statement yesterday.
Analysts had on average predicted profit of 88 cents and sales of $27.4 billion, according to data compiled by Bloomberg.
Hewlett-Packard shares gained 4.9 percent to $33.35 at 9:42 a.m. in New York, the biggest intraday increase since November 27.
Through yesterday, the stock had been up 14 percent so far this year, compared with a 2.4 percent gain in the Standard & Poor’s 500 Index.
Net income in the second fiscal quarter rose 18 percent to $1.27 billion, or 66 cents a share, from $1.08 billion, or 55 cents, a year earlier.
“We want to become a growth company -- this is the second quarter of basically flat revenue,” Whitman said in an interview yesterday.
“While you may say that’s not very exciting, it’s way more exciting that the historical declines we’ve had for the last eight quarters.
The fact that we’re stabilising revenue is encouraging and positions us well for the future.”
The job cuts announced yesterday don’t reflect worsening demand for the company’s products, the chief executive said on a conference call.
Whitman said she doesn’t anticipate the need for further cuts. Hewlett-Packard had 317,500 employees at the end of October.
For the third quarter, Hewlett-Packard forecast that profit, excluding amortisation, restructuring charges and other costs, will be 86 cents to 90 cents a share.
That compares with the average analyst estimate for 90 cents.
Industrywide global PC shipments dropped in the first three months of 2014 as consumers in emerging markets opted for smartphones and tablets, while corporate demand helped slow the pace of decline.
Quarterly shipments fell 4.4 percent to 73.4 million units, IDC said.
Hewlett-Packard’s market share rose to 16 percent, making it the No. 2 vendor after Lenovo Group, Gartner said last month.
Second-quarter revenue in the personal-systems unit, which includes PCs, rose 7.4 percent to $8.18 billion, boosted by sales of business computers.
Printing-division sales fell 4.3 percent to $5.83 billion.
One of Silicon Valley’s oldest companies, the manufacturer’s product range spans from PCs and home printers to the servers, networking gear and software used by corporations.
Hewlett-Packard has fallen behind in mobile computing at a time when consumers have migrated to smartphones and tablets made by Apple and Samsung Electronics.
Hewlett-Packard’s enterprise-computing unit, which includes servers, had sales of $6.66 billion.
Within that division, revenue from servers based on Intel Corporation technology rose 0.8 percent.
Storage sales were down 5.7 percent, while networking revenue climbed 6.5 percent.
The enterprise-services division posted a 7 percent decline in sales to $5.7 billion.
“I don’t know that we’ve seen much that makes one feel that they can actually grow again,” said Rob Cihra, an analyst at Evercore Partners.
He has the equivalent of a hold rating on the stock. - Bloomberg News