SAN JOSE, Calif. – Hewlett-Packard's quarterly profit sank a whopping 91 percent to nearly zero in its latest quarter due to $2.1 billion in costs mainly associated with its decision to jettison its WebOS tablet and smartphone business. Profits for HP's fiscal year were down 19 percent and revenues overall were up one percent.
HP reported revenues at $127.2 billion and profits of $9.7 billion for its fiscal 2011, based on generally accepted accounting principles (GAAP). For its most recent quarter revenues were $32.1 billion, down about three percent from the same period last year.
Executives issued a dour forecast of continued declines in revenues through 2012 with no upturn until 2013. "The macro economy is uncertain globally, especially in Europe with consumer spending soft, and we are beginning to see a slowdown in commercial spending," said Cathie Lesjak, HP's chief financial officer.
The flooding in Thailand will impact hard disk supply into the second quarter, impacting PC sales and to some extent server sales as well, she said.
"I've been on phone with the heads of our four disk-drive partners, and I'm not sure even they have a clear picture of when they will be fully up and running," said HP's new chief executive Meg Whitman.
The company increased its hard drive purchases in October. "We will get more the our fair share of drives because we were on this really fast, but I think there will be some impact for the overall industry, and I think there will be some shortages in Q1 and Q2," Whitman said.
Taking a conservative stance, the company has decided to only forecast earnings per share (EPS) going forward. It estimates non-GAAP EPS for its next fiscal quarter at $0.83 to $0.86, down from $1.17 for the last quarter. For fiscal 2012 it forecasted non-GAAP EPS of at least $4.00, up from $3.32 for the past fiscal year and $3.69 for the previous year.
Most of HP's businesses saw declines in the most recent quarter. Sales of PCs were down two percent, servers were down four percent and printer and imaging sales were down 10 percent.
Sales of HP's Itanium servers fell 23 percent over the year. Earlier this year, archrival Oracle said it would stop supporting Itanium with its popular database software. Sales of the systems will continue to decline for the foreseeable future, HP said.
In comments during a Q&A, Whitman suggested HP's so-called Business Critical Server (BCS) group needs to move to a new high-end server platform beyond Itanium. "The BCS business is declining, and we have to manage that until we can get to a new platform--it’s a slow decline, but it’s a decline," she said.
HP's services business was up a modest two percent. The company's software sales jumped 23 percent, but it represent a relatively small part of the company's revenues.
Whitman said HP continues to be in first or second place in most of its key markets, but needs to execute better, something she pledged to do. "We have a great platform on which to build," she said.
HP recently completed its $10 billion acquisition of server analytics company Autonomy, creating a new information management group around it. HP will not execute any large mergers in the foreseeable future, and HP will not try to re-make itself into a software company, said Whitman.
HP will still consider a billion-dollar merger in 2012, but generally most mergers will be at the level of less than $500 million she said. "We cannot rely on mergers for growth," she said.