HP Profits Fall 19%, But Business Stabilizing

Hewlett-Packard on Tuesday reported that profits fell 19% in the fiscal third quarter, as revenue declined in nearly every business unit, including PCs, storage and servers and printers.

HP reported that profits in the quarter ended July 31 fell to $1.6 billion, or 67 cents a share, from $2 billion, or 80 cents a share, during the same period a year ago. Revenue declined 2% to $27.5 billion from $28 billion.

HP forecast fiscal fourth quarter revenue to be up about 8% from the fiscal third quarter and earnings of $1.12 a share. Wall Street analysts polled by Thomson Reuters expected fourth-quarter earnings of $1.07 a share and revenue up 9% quarter-to-quarter.

Despite the grim third quarter news, HP's results were slightly better than its May forecast and Chief Executive Mark Hurd hinted that the worst of the economic recession may be over. "Business is stabilizing, and we are confident that HP will be an early beneficiary of an economic turnaround and will continue to outperform when conditions improve," Hurd said in a statement.

Hurd's comments appeared more upbeat than ones he made in May. In an interview with The Wall Street Journal, Hurd said the spending climate in the fiscal third quarter was unchanged from the previous quarter, when revenue fell 3.2% and profits dropped by 17%. He later told financial analysts during a conference call, "I'm not ready to call it (customer spending) better."

Hurd's more recent comments were in line with a July Gartner report that found improvement in the recession-hammered PC market. The analyst firm found that PC shipments in the second quarter had fallen considerably less than previously projected. Gartner rival IDC said shipments fell by half that its previous forecast and said the market should return to growth by the end of the year.