Tuesday, June 18, 2024

HP Posts Solid 3Q Results As Post-Hurd Era Begins

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HP (NYSE: HPQ) reported its third quarter earnings today, but the news was overshadowed by larger concerns over the company’s strategy in the wake of former CEO Mark Hurd’s abrupt dismissal earlier this month as result of his filing bogus expense reports and his settlement of a sex harassment claim by a former contractor.

The computer giant’s stock dropped more than 10 percent following Hurd’s departure and has yet to recover.

On the bright side, HP reported revenue of $30.7 billion (up 11.4 percent from a year ago) and $3.4 billion in profits, beating the consensus forecast of analysts surveyed by Thomson Reuters who were expecting $30.46 billion in revenue.

Earnings came in at $1.08 a share (non-GAAP), matching estimates, and represents a jump from $0.92 from the year-ago quarter. HP had released preliminary results for the quarter earlier this month when it announced Hurd’s resignation.

“The broad-based strength of HP’s Q3 performance further demonstrates the power of our strategy and the discipline of our execution,” Cathie Lesjak, HP’s CFO, who was appointed interim CEO while the company searches for Hurd’s eventual replacement, said in a statement. “We raised our full-year outlook and are continuing to build momentum in driving out costs, investing for profitable growth and capitalizing on HP’s competitive advantages in the marketplace.”

HP’s Enterprise Storage and Servers (ESS), as well as its Personal Systems Group led the way. ESS revenue came in at $4.4 billion, up 19 percent from a year ago and operating profit was $549 million, up from $381 million.

HP’s Personal Systems Group (PSG), which includes PCs and notebooks, saw a 12 percent increase in unit shipments. HP said it leads all other computer makers in PC market share worldwide. PSG revenue increased 17 percent to $9.9 billion with an operating profit of $469 million for the quarter, up from $387 million a year ago.

HP’s mainstay Imaging and Printing Group also had a good quarter with revenue increasing 9 percent to $6.2 billion and unit shipments of printers up 16 percent. Operating profit came in at $1.0 billion for the quarter versus $960 million a year ago.

Update: The post-Mark Hurd era

At the time of Hurd’s dismissal, HP said its investigation showed the sexual harassment claim was unfounded, but the company said the false expense reports, which reportedly hid his relationship with the contractor, Jodie Fisher, were enough to send Hurd on his way with a multi-million dollar golden parachute.

Earlier today, HP announced it had hired the executive search firm Spencer Stuart to handle the CEO replacement effort that will include candidates from both inside and outside HP.

“The Spencer Stuart team will be instrumental in helping us identify a CEO with the right leadership qualities to move HP into the next phase of growth,” HP board member John Hammergren, said in a statement. Hammergren has been named chair of HP’s search committee along with other HP board members.

There were only a few questions related to Hurd or the CEO transition during the conference call with analysts to discuss the earnings results.

Asked whether HP was maintaining a high level of contact with its biggest customers, Lesjak seemed to take exception to the implication that Hurd’s departure might be leaving some of those customers wanting.

Fisher, the former HP contractor, worked at special events for HP’s biggest customers. Reportedly, part of Fisher’s job was to be sure Hurd engaged HP’s most important customers at these events.

“If you look at our account coverage, we have general managers on all the accounts and our sales are increasing,” said Lesjak. “Any one person isn’t going to drive a relationship,” she continued. “My staff and I make those [sales] calls and we continue to make those calls.”

Updated to include comments made during HP’s earnings call.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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