HP misses earnings targets in difficult Q3

Hewlett-Packard Co. reported growth in earnings and revenue for its third fiscal quarter but still missed analyst forecasts, prompting Chairman and Chief Executive Officer Carly Fiorina to acknowledge that the company “should have done better.”

Revenue for the three months ended July 31 totaled $17.35 billion, up 5 percent from the same quarter last year but lower than the $17.5 billion that analysts had been expecting, according to a poll by Thomson First Call.

Earnings on a pro forma basis came in at $0.23 per share, up from $0.14 per share in the third quarter of fiscal 2002. Analysts had been expecting pro forma third-quarter earnings of $0.26 per share, Thomson said. Earnings based on generally accepted accounting principles were $0.10 per share.

“The third quarter is always tough, but we still should have done better,” said Carly Fiorina, HP chairman and chief executive officer, in a conference call. “Nevertheless, we are confident in our strategy and the actions we’re taking. We expect to deliver a strong fourth quarter with every one of our businesses profitable.”

In its enterprise systems group, HP’s mid-range and low-end Unix server businesses performed poorly, as did its overall enterprise group in Europe and Japan, the company said. Sales of its Superdome systems were brighter, with revenue up 64 percent over the prior year, HP said.

Overall revenue from the enterprise group was $3.71 billion, roughly flat from a year earlier, while operating losses came in at $70 million, wider than its loss of $7 million in the immediate prior quarter but better than its loss of $322 million reported for the same quarter a year earlier, the company said.

In its personal systems group, slow desktop sales in the U.S. and HP’s own “overly aggressive” price discounts pushed results into the red, although the division will return to profit by the end of the year, HP said. Notebook sales were strong, up 27 percent year over year, and that part of the business remained profitable, HP said.

The personal systems group’s total revenue climbed 5 percent to $4.97 billion, while its operating loss was $56 million, smaller than the $140 million loss it reported a year ago.

HP’s services division performed well, with revenue from managed services up 21 percent from a year earlier and revenue from customer support growing 8 percent. This helped the group return to double-digit profitability during the quarter, HP said.

Revenue from the imaging and printing group grew 10 percent year over year to $5.24 billion, and profit returned to “more normal levels,” HP said.

Looking ahead, analysts expected HP to report earnings of $0.36 per share on revenue of $19.04 billion in the fiscal fourth quarter, First Call said.

Ahead of the announcement, HP’s (HPQ) shares on the New York Stock Exchange closed at $22.16.