HPQ HP Inc

By Don Clark 

HP Inc. met Wall Street's modest expectations in its first quarter as an independent company, despite signs that weak conditions in printing and personal computers aren't improving quickly.

The Palo Alto, Calif., company said earnings from continuing operations declined 16% in the first fiscal quarter ended in January, while revenue fell 12% from the year-earlier period.

HP projected profit for the current quarter with a midpoint slightly lower than analysts estimated, while reaffirming the company's guidance for the full year.

"What I'm most pleased about is we delivered on our plan," said Dion Weisler, HP's chief executive, in an interview.

Shares of HP, down 26% over the past three months, rose 0.9% to $10.92 in after-hours trading. The company is composed of a set of former businesses of Hewlett-Packard Co., which broke up in early November into two publicly held companies.

Mr. Weisler has cautioned that printers and PCs face a series of headwinds that won't go away soon. In printing, which accounts for about 80% of the company's profits, sales of both hardware and ink have been hurt by competition, shifting currency rates and changing habits of computer users.

In the first quarter, HP said total printing revenue declined 17%, with revenue from ink and other supplies down 14% and hardware unit sales off 20%.

In PCs, HP and other hardware makers continue to suffer from a gradual slide in demand since spending began shifting to smartphones and tablets several years ago. The company, the No. 2 player in the market behind Lenovo Group Ltd., said its PC revenue declined 13% in the first quarter.

HP said the strong dollar was a big factor in its results. On a constant currency basis, the company said total revenue was off only 5%.

Mr. Weisler, who hails from Australia, joined HP in 2012 after stints at rivals Lenovo and Acer Inc. He argues that HP can return to growth with the aid of innovative products. One attempt emerged at this week's Mobile World Congress, when the company introduced the Elite X3, a big-screen smartphone that can be plugged into a cradle and connected to a keyboard and display to act like a PC.

"You can't cut your way to glory," Mr. Weisler said. "You have to innovate."

HP's first-quarter net income reflects the divestiture of the business-oriented operations that now constitute Hewlett Packard Enterprise Co., a separate publicly held company. Profit on that basis for the period ended Jan. 31 came to $592 million, or 33 cents a share, down sharply from the year-earlier figure of $1.37 billion, or 73 cents a share.

Revenue declined to $12.25 billion from $13.86 billion. The company hadn't previously provided figures for the year-earlier period.

For continuing operations, HP said earnings on an adjusted basis that excludes restructuring charges came to 36 cents a share, compared with 41 cents for the same quarter a year ago. Analysts on that basis had expected earnings of 36 cents per share on revenue of $12.2 billion, according to Thomson Reuters.

For the second fiscal quarter ending in April, HP estimated adjusted per-share earnings of 35 cents to 40 cents a share. Average analysts estimates were 39 cents per share. The company didn't project revenue.

HP Enterprise, the second public company formed by the breakup of the former Hewlett-Packard, is due to report its first quarterly results on March 3.

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

February 24, 2016 16:37 ET (21:37 GMT)

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