HP gives a bleak forecast as split approaches

The strengthening dollar has forced HP to lower its outlook for the year

Hewlett-Packard has lowered its financial outlook for the year after another quarter of declining sales and profit.

CEO Meg Whitman is trying to get HP in shape before the company splits itself in two later this year. One half will sell PCs and printers and the other will focus on back-end business products.

But the strengthening dollar has been making life tough for U.S. multinationals, and HP is no exception. A strong dollar can have several negative effects, including making overseas sales seem smaller when they're translated back into the home currency.

"As is the case with many U.S.-based companies, this currency challenge is having a significant impact on HP's financial outlook," the company said in a statement Tuesday.

It now expects adjusted earnings for fiscal 2015 to be between $US3.53 and $US3.73 a share, well below the $US3.95 analysts have been expecting, according to Thomson Reuters. HP also lowered its forecast for the current quarter.

The news sent its shares 6 percent lower in the after-hours markets, to $36.20 at the time of this report.

"While we were able to manage the impact of currency in the quarter and deliver earnings as expected, we believe the impact on [fiscal year 2015] will be significantly greater than we anticipated in November," Whitman said in the statement.

HP will try to offset the currency issue through price adjustments and "productivity," but mitigating it fully would require "reducing investments and mortgaging our future," Whitman said.

"We won't do that," she said.

Even without the strong dollar, though, HP's business declined in the last quarter, ended Jan. 31. Revenue was $US26.8 billion, down 5 per cent from a year earlier, or down 2 per cent adjusting for the currency fluctuations, HP announced.

Net profit was down 4 per cent to $US1.4 billion, it said.

None of HP's main divisions reported any growth. Sales from its personal systems group were flat from last year, while its printing and enterprise services divisions both reported a drop in sales.

Sales from its enterprise products division were flat. Within that division, x86 server sales were up 7 percent, but networking sales fell 11 percent and storage sales were flat.

HP announced last year that it will split itself in two by the end of its current fiscal year, which closes October 31.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com

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James Niccolai

IDG News Service
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