HP Overcomes the Global Abandonment of the PC with Gains in Business Services

Michael Teague |

Meg Whitman, CEO of Hewlett PackardWith worldwide sales of personal computers slumping as consumers flock in droves to mobile devices and cloud services, Hewlett-Packard (HPQ), formerly the world’s leading PC-maker, has struggled over the past year along with other hardware and desktop-based tech companies.

Ahead of the company’s release of its earnings report late on Tuesday, expectations were low. Unsurprisingly, HP suffered a setback in the form diminishing PC sales, but surprised investors with some promising offsets to those losses.

For the second fiscal quarter, HP reported net income of $1.08 billion, or $0.55 per share on revenue of $27.6 billion, down from the prior year period during which the company earned $1.59 billion, or $0.80 per share on revenue of $30.7 billion. On an operating basis, however, HP earned $0.87 per share, comfortably ahead of expectations of $0.81 per share on revenue slightly over $28 billion.

Furthermore, the company raised its guidance for fiscal Q3 to a range of $0.84 to $0.87 per share, ahead of current expectations of $0.83 per share. HP’s also raised its EPS estimate for the full year of 2013 from $3.50 per share to $3.60 per share.

While Wall Street had not expected much from the company, the earnings beat can be seen as a credit to former California gubernatorial candidate and CEO Meg Whitman’s turnaround plan that began when she took the helm more than a year ago.

Hewlett-Packard’s shares jumped 14 percent in late trading, to $24.19 in response to the news, after closing the day’s trading session on a 0.57 percent gain to $21.23.

The company’s declining PC sales were in large part supplemented by increases in its enterprise services unit as well success in its printing unit. With the inevitable drop in revenue from the formerly crucial personal systems division, down 20 percent over the last quarter, Whitman’s turnaround plan has involved extensive job-cutting and intensified focus on enterprise, providing IT services to businesses. Even the company’s under performing units saw margin increases throughout Q2

HP also used some of its cash to knock off almost $2 billion of its $4.7 billion of debt. The company’s shares have bounced back in 2013, advancing almost 50 percent since the beginning of the year.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
HPQ HP Inc. 13.91 0.01 0.07 17,328,483
UPIP Unwired Planet Inc. n/a n/a n/a n/a


Emerging Growth

IBC Advanced Alloys Corp.

IBC Advanced Alloys Corp is engaged in the production and development of specialty alloy products. Its products include copper alloys and berryllium aluminium alloys.

Private Markets

BioSculpture Technology, Inc.

BioSculpture Technology, Inc. (“BST”) is a commercial-stage medical device manufacturer of liposuction surgical instruments for surgeons. It offers the FDA-cleared Twin Cannula Assisted Liposuction ("TCAL") Airbrush Liposculptor II® controllers, Airbrush®…


Spotify is a online music service offering providing digital content from a range of record labels and artists. Users can browse through the interface by artist, album, genre, playlist, record…