Whitman: 'We've got a journey ahead of us' as HP's Q1 earnings slip 44%

Hewlett-Packard (NYSE: HPQ) saw revenue slump nearly across the board in the first quarter, reporting lower revenue in three of its four major business groups. PC sales were off 15 percent, and printer unit revenue was down 7 percent. Its enterprise server/storage/network (EESN) revenue dropped 10 percent year-over-year. The bright spot? Revenue from services grew 1.1 percent.

But the service's revenue didn't provide enough of a boost to the struggling computer products company, nor to its new CEO, Meg Whitman. The company reported revenues of $30 billion, down 7 percent from $32.4 billion a year ago; that missed analyst estimates of $30.6 billion. Earnings, excluding certain items, were 92 cents a share, down from $1.36 a year ago; still, it was better than the lowered expectations analyst had put forward: 87 cents.

The weak results pushed shares down marginally after hours, off 1.24 percent to $28.58. The shares traded in a 52-week range of $21.50 to $43.86.

Looking forward to the second quarter, HP forecast non-GAAP earnings of 88 cents a share to 91 cents a share; analysts expect the company to earn 95 cents per share for the second quarter.

For the year, HP reiterated its full year fiscal 2012 outlook of GAAP earnings of about $3.20 per share and non-GAAP earnings of at least $4 per share. Analysts forecast earnings of $4.08 per share for the fiscal year 2012.

For Whitman, it was the first full quarter at the helm since she replaced Leo Apotheker in September. She became the eighth chief executive since 1999.

HP saw sales decline in all regions. In the Americas, first quarter revenue was $13.2 billion, down 9 percent year over year. Europe, the Middle East and Africa revenue of $11.7 billion was down 4 percent, Asia-Pacific revenue was $5.2 billion, a decline of 10 percent.

International revenue made up 66 percent of total HP sales. BRIC countries (Brazil, Russia, India and China) generated revenue of $3.1 billion, down 13 percent; it represented 10 percent of total HP revenue.

HP said its ESSN unit operating margin fell 11.2 percent, year-over-year. Networking revenue was flat, and Industry Standard Servers revenue was down 11 percent in what Whitman said was a "highly competitive market" compounded by a hard disk shortage. Business Critical Systems revenue was down a whopping 27 percent and storage revenue was down 6 percent.

Whitman, during the earnings call, challenged an assertion that HP showed a "lack of competitiveness."

Saying HP under-invested in its own systems and processes, she said HP had "an enormous number of SKUs, which leads to complexity in support and in selling." And, she acknowledged, "Some of our competitors do some of those things better than we do."

Whitman also said it was key that the company act to stop its revenue decline and to "gain share in every single market."

"I would hope that as we get through 2012, you'll see revenue decline flatten out and as we get into 2013 we'll start to grow," she said. "It depends on how fast we can get after some of these challenges in the business. A lot of this is in our own hands."

But, she cautioned, a turnaround for a company of the magnitude of HP could take years.

"If you look at companies who go through these turnarounds, these things are not done in less than two years and often they take three to five years," she said. "You'll see forward progress. We've got a journey ahead of us."

For more:
- see this release
- see this Reuters article

Special Report: IP Communications in the fourth quarter 2011 

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