Apotheker Said HP Would Get Out Of The PC Business

March 7, 2012 by staff 

Apotheker Said HP Would Get Out Of The PC Business, Hewlett-Packard (HPQ) reported a decline in sales and a sharp drop in profit Wednesday, as new CEO Meg Whitman warned “we have a long road ahead of us” in turning around the mammoth tech company.

In a more sweeping outline of her plans for HP than she has offered in public before, Whitman toldanlysts on a conference call that HP must find ways to cut spending so it can put more money into developing new products and getting them on the market more quickly.

“We underinvested in innovation for the last several years and we’ve been late to market too often,” Whitman said of the company’s troubled personal computer division. She also acknowledged challenges in the company’s printing business, a longtime cash cow for HP, and added: “We’ve got to create the capacity for more sustainable innovation.”

Without giving specifics, Whitman said she hopes to free up resources by “standardizing” or automating some of HP’s internal operations, better coordinating the sales efforts of HP divisions and reducing the number of products or versions of products that HP sells.

“We cannot keep our current level of costs and just layer investment on top of that,” she said.

Whitman’s remarks came as HP reported the results of its first full quarter since she replaced the fired Leo Apotheker last fall.

The tech giant had net income of $1.5 billion for the quarter that ended Jan. 31, down 44 percent from a year earlier. Total sales were $30 billion, down 7 percent from the same period a year ago, as three major divisions reported sales declines: Revenue from personal computers was down 15 percent, printing fell 7 percent and data-center hardware dropped 10 percent.

HP’s software business was a lone bright spot, reporting a 30 percent increase in sales driven by the company’s acquisition of software-maker Autonomy last fall. Software, however, contributes just 3 percent of HP’s revenue.

Despite those results, HP’s earnings were better than Wall Street expected. But the company issued a forecast Wednesday for earnings in the current quarter that fell short ofanlysts’ predictions.

Palo Alto-based HP is one of the world’s largest technology companies, selling a broad range of consumer and commercial hardware, software and services. But it has been struggling to get back on track after a period of internal upheaval and external challenges.

The company’s PC business, for example, took a big hit last year after Apotheker announced HP might sell or spin off that business. Whitman canceled that plan, butanlysts say the uncertainty contributed to a sharp drop in HP’s share of worldwide PC purchases last fall.

HP also has suffered from changing consumer trends, including the phenomenal popularity of Apple’s (AAPL) iPad, and an industrywide shortage of components after severe floods interrupted disk-drive production at suppliers’ factories in Thailand.

The disk-drive shortage hurt HP’s sales of both PCs and bigger computer systems, according to Chief Financial Officer Cathie Lesjak. Rival computer-maker Dell cited a similar impact this week when it issued a weak forecast for the current quarter.

Lesjak said she expects business will improve in the second half of 2012, as the disk-drive shortage eases and HP brings several new products to market.

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