Shares of HP are tanking after hours — down 8% — after the company released weak Q2 guidance..The company just released earnings, and although the EPS and revenue were fine, guidance was mediocre.
Specifically, the company sees earnings in Q2 of $1.19 to $1.21, which is well below $1.25 street estimates.
For the year, EPS of $5.20-$5.28 is right around the $5.24 estimates.
Speaking on CNBC, CEO Leo Apotheker is citing a weak consumer business, and somewhat soft services in the quarter.
That shows up in the earnings release: revenue in the Personal Systems Division, which sells personal computers, was down 1% from last year, with Commercial Clients (sales to consumers) down 12%. Enterprise services revenue was also down 2%, but printing revenue was up 7%, which saved the company from even worse results.
Apotheker is set to discuss the results on a call starting in a second here, and we’ll be covering it live. Click here or refresh your browser for updates.
4:18ET: Waiting for the call to begin…
4:20: Leo is talking now, hig lighting the company’s revenue and earnings growth from last year.
4:22: We need to improve our growth in some areas. Blames “specific issues in our China business.” Very proud of WebOS announcement, excited about platform.”Quite strategic for us going forward.”
4:24: Services signings were weaker than expected during the quarter as well. “Clearly there’s more to be done, and we’re going to get it done.”
4:25: He’s hoping to see us all at the big HP event on March 14 in San Francisco: he’ll talk strategy, and “more connected world” from enterprise to consumer. (SAI will be there.)
4:26: “We have isolated areas we need to improve.”
4:27: Now it’s Q&A. How long can enterprise growth continue if consumer side remains weak?
Strong performance across hardware, industry servers growing 17%, PC commercial clients up 11%, storage up 14%, routing and switching in excess of 13%. So the enterprise business is strong. Servers are gradually coming back after a long slow period.
Q: Full-year revenue was revised downward, but EPS was revised upward. Why?
Note that we grew revenue 4% year over year in Q1, but EPS was up 26%. “Real operational rigour.”
They remain cautious about consumer spending, and expect services to grow slower than normal seasonal patterns because of bad short-term signings.
Q. What is driving margin expansion?
Gross margins increased 150% due to component pricing and favourable business mix, including big increase in networking business. They don’t expect component prices having a big effect in Q2.
Q. Any specific components that are cheaper?
Memory and LCD panels, yes.
Q. Anything that surprised you or made you change assessment of HP’s strengths in your first quarter on the job?
Not really. Feel confident about performance of each business unit. Drive portfolio so we can sustain “continuous expansion of our gross margins.” (That sounds a lot like cost-cutting.)
Q. What about software? What percentage do you see it becoming of overall revenue?
Software has been an incredible part of strategy to date, will be even more important going forward. More details coming on March 14.
Q. When is the TouchPad coming out? Summer or earlier?
Timing of all our WebOS products. Wi-Fi version of TouchPad available in summer in the US, and rest of the world in the fall.
That’s a wrap.