Ahead of the Bell: HP's 2Q results likely to sag

AP News
Posted: May 22, 2013 6:36 AM

SAN FRANCISCO (AP) — Hewlett-Packard will provide an update on its efforts to rise above the sinking PC market when it releases quarterly earnings Wednesday after the closing bell.

The quarter will likely reveal how far HP still must go.

Revenue is expected to fall, which would make it the seventh consecutive quarter of comparable declines. Management has already predicted shrinking profits, although job cuts and other money-saving measures may have helped HP dodge the huge profit declines suffered by its rival, Dell Inc. Last week, Dell reported that its quarterly earnings plunged 79 percent.

Analysts, on average, are predicting Hewlett-Packard Co. will post adjusted earnings of 81 cents per share on revenue of $28 billion during its fiscal second quarter ending in April, according to FactSet That compared with adjusted earnings of 98 cents per share on revenue of $30.7 billion at the same time last year.

As has been the case for the past two years, the threat against the company's personal computer division is the greatest. There has been a seismic technology shift to smartphones and tablets, and away from laptop and desktop machines. No company has been as hard hit as HP, the world's largest PC maker.

Although its measurements don't precisely align with HP's fiscal quarter, the research firm International Data Corp. said HP was having a tough time selling PCs to start the year. HP's PC shipments plunged 24 percent during the first three months of the year, according to IDC. That was worse than the erosion in the overall PC market, which dropped 14 percent from last year.

The company, based in The Palo Alto, Calif., probably had to slash prices to spur PC sales. That's what Dell did, and its profit margins were the casualty.

HP's Meg Whitman believes it may take another two or three years before the company's revenue begins to rise again steadily She is trying to engineer a turnaround by building more PCs with touch-control screens, selling more tablets and expanding product lines in business software, data analysis and storage and technology consulting.

HP's stock is stuck below recession-era levels, and they are down 3 percent over the past year. The Standard & Poor's index is up almost 27 percent in that same time frame.

Shares rose 13 cents to $21.24 in premarket trading Wednesday.