HP Beats on Earnings, Announces Layoffs of 27,000
Hewlett-Packardbeat on earnings and announced plans to lay off 27,000 employees, or 8% of its workforce. Its third-quarter outlook fell short of expectations but its full-year topped the consensus.
Shares of the world's No. 1 personal computer maker rose more than 10 percent in after-hours trading. (Get the latest HP quote here.)
HP outlined its plan on Wednesday to lay off roughly 27,000 employees or about 8 percent of its workforce. The layoffs will be mainly achieved through early retirement offers, and will generate annual savings of $3 billion to $3.5 billion as it exits fiscal 2014. The planned layoffs also helped boost the company's full year earnings outlook, the company said.
Layoffs "adversely impact people's lives, but in this case, they are absolutely critical to the long-term health of the company,'' Chief Executive Meg Whitman said on a conference call with analysts. "We will have a smaller, more profitable services business in the future."
HP said in a statement that most of the savings would be reinvested into the company, but will also take a pretax charge of $1.7 billion in fiscal 2012 because of the cost-cutting plan. Earlier reportshad forecast layoffs to range from 25,000 to 35,000 workers.
For the second quarter, HP reported earnings excluding items fell to 98 cents per share from $1.24 per share in the year-earlier period.
Net income fell to $1.59 billion, or 80 cents a share, from $2.3 billion, or $1.05 a share, a year ago.
Revenue dropped 3 percent to $30.69 billion from $31.63 billion.
Analysts had expected the company to report earnings excluding items of 91 cents per share on revenue of $29.92 billion, according to Thomson Reuters.
"Overall I feel cautiously optimistic coming out of Q2," Whitman said. She also noted that "there is PC demand. With a refresh coming around Windows 8, there is more strength in the US and Asia."
In particular, Whitman says industry standard servers and networks are improving in China, where HP is seeing the "early signs of a turnaround."
The company’s third-quarter earnings outlook was light: 94 to 97 cents a share vs. expectations of $1.02 a share. Though the full-year forecast beat — $4.05 to $4.10 a share vs. $4.03 consensus.
HP's acquisition of British software company Autonomy for over $11 billion is facing challenges, and second-quarter results in the division fell short of HP's expectations, Whitman said.
HP has moved the division under its chief strategy officer Bill Veghte, and Autonomy founder Mike Lynch will be leaving the company.
Second-quarter results from HP's other divisions were also weak. Sales from the personal systems group, encompassing PCs, were flat with a decline in sales to consumers offsetting revenue from commercial clients. Revenue from its bread-and-better printing group, which is being merged with the PC group, fell 10 percent after weak consumer and corporate demand.
"We improved the channel inventory to within an acceptable range," Whitman said on the call, referring to the printing group. "However, we continue to face a weak demand environment."
Sales of enterprise servers, storage and networking equipment fell 6 percent.
HP's competitor Dell released an earnings miss just one day prior, sending shares down more than 8 percent in trading after the closing bell on Tuesday.
— Reuters contributed to this report.