HP Profit Falls in Last Report Before Company Splits


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A man with a Hewlett-Packard printer in central New Delhi. The company reported weakness in both its PC and printer sectors.

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Graham Crouch/Bloomberg News, via Getty Images

Hewlett-Packard said on Thursday that its profit fell 13 percent in the third quarter, a reminder of the grim challenges prompting a breakup of the company in the coming months.

The company said its net income for the quarter, which ended July 31, fell to $900 million, or 47 cents a share, from $1 billion, or 52 cents a share, in the same period last year. Net revenue fell 8 percent, to $25.3 billion, from $27.6 billion a year ago.

Revenue was slightly below projections by Wall Street analysts, who were expecting revenue of $25.44 billion, according to a survey by Thomson Reuters. But its profit of 88 cents a share, if items like restructuring costs and acquisition-related charges were excluded, was slightly better than Wall Street’s expectations of 85 cents a share.

The company’s shares rose slightly in after-hours trading.

The financial report is the last to be announced from Hewlett-Packard before it splits itself into two new, independently traded companies, which is expected to take place Nov. 1. On that date, Hewlett-Packard will transform into Hewlett Packard Enterprise, a company that will supply technologies to businesses, and HP Inc., a PC and printer company. Hewlett-Packard will issue one final report for the combined company in late November, after the company has been divided.

The breakup of the company is being explained by Meg Whitman, HP’s chief executive, as an effort to create more nimble, focused companies that can better navigate forces roiling the tech industry. HP, one of Silicon Valley’s founding corporations, was once the largest PC maker in the world, but the company has struggled to adapt to a technology landscape in which the PC is no longer the dominant device.

During a conference call with analysts, executives discussed the future of the two companies that HP will spawn in markedly different tones. While they sounded bullish about the prospects for Hewlett Packard Enterprise, they used phrases like “very challenging market” and “difficult business environment” when talking about the printing and PC groups that will be part of HP Inc.

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HP’s single-day trading.

Ms. Whitman will be chief executive of Hewlett-Packard Enterprise and nonexecutive chairwoman of HP Inc.

“It was a strikingly different message in terms of optimism for HPI versus HPE,” said Toni Sacconaghi, a research analyst at Sanford C. Bernstein, using the abbreviations for the future PC-printer and enterprise companies.

The company’s PC business was especially weak, with revenue down 13 percent. It sold 11 percent fewer PCs during the quarter than the same quarter a year before, with unit sales of notebooks down 3 percent and desktops down 20 percent.

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Meg Whitman, chief executive of HP, which is splitting into two companies.

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Kyle Green/Idaho Statesman, via Associated Press

Revenue from its printer business fell 9 percent. The combined printer and PC businesses, which will become the foundation of the new HP Inc., brought in revenue of $12.6 billion, half of Hewlett-Packard’s total revenue.

The PC industry broadly has been mired in a slump for years, as newer mobile technologies, including smartphones, have sucked up a bigger and bigger share of technology spending. A new operating system recently released by Microsoft, Windows 10, has raised hopes of a possible stimulus to the PC industry. HP executives praised the new software, but they did not sound optimistic about it creating a rebound for the PC business in the next several quarters, instead predicting high single-digit declines in PC sales.

HP’s enterprise group, which includes servers, storage and networking, experienced a 2 percent increase in revenue to $7 billion.

Splitting the company in two will not diminish the challenges HP is facing. One view among analysts is that HP is trying to attract different classes of investors, who could reward the two parts of HP with higher values based on their different growth rates and dividends.

“I am very pleased that we have continued to deliver the results we said we would, while remaining on track to execute one of the largest and most complex separations ever undertaken,” Ms. Whitman said in a statement.



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