HP Shares Slide In After-Hours Trading On 5 Percent Sales Drop, Currency Issues
Hewlett-Packard shares fell 5 percent, or $2.20, to $36.29 in after-hours trading after the company reported a 5 percent drop in sales for its first fiscal quarter ended Jan. 31, and adjusted fiscal-year guidance as a result of a negative impact from a strengthening U.S. dollar.
The $112 billion computer giant, which is preparing to split into two new publicly held Fortune 50 companies on Oct. 31, reported sales of $26.8 billion for the quarter, down slightly from the Wall Street consensus of $27.4 billion.
HP reported non-GAAP diluted earnings of 92 cents per share, just above the Wall Street consensus of 91 cents per share.
[Related: HP CEO Whitman Lays Out Transition Team Plan In Internal Memo]
With the U.S. dollar strengthening, HP also said currency challenges are significantly impacting its business. As a result, the company said earnings for the current quarter will be in the range of 84 cents to 88 cents, well below the Wall Street consensus of 96 cents per share.
For fiscal 2015, HP estimates non-GAAP diluted net earnings to be in the range of $3.53 to $3.73, reflecting an estimated currency impact of 30 cents per share.
"While we were able to manage the impact of currency in the quarter and deliver earnings as expected, we believe the impact on FY15 will be significantly greater than we anticipated in November," HP CEO Meg Whitman said in a prepared statement. "We'll work hard to offset these impacts through re-pricing and productivity, but fully mitigating currency movements of this size would require reducing investments and mortgaging our future. We won't do that."
Despite the currency issues and drop in sales, Whitman said the HP turnaround is on track. "We grew operating profit margins across all of our major business segments, increased investment in innovation, and executed well across key areas of our portfolio and in our separation activities," she said. "Our progress continues as we head into Q2."
HP reported a 5 percent drop in its printing business and flat sales for its personal computer business in the quarter. Those two businesses will make up the $57.3 billion HP Inc. after the company is split into two.
Hewlett-Packard's Enterprise Group sales were also flat in the quarter with the company's networking business down 11 percent for the period compared with the year-ago quarter.
Enterprise services, meanwhile, were down 11 percent in the quarter, and software sales were down 5 percent year-over-year.
The enterprise services, systems, software and infrastructure business will all become part of the $57.6 billion Hewlett-Packard Enterprise business once the HP split is complete.
PUBLISHED FEB. 24, 2015