HP reports 4.7 per cent fall in Q1 revenue, forecasts full-year earnings below estimates

Hewlett-Packard (HP) reported flat or lower quarterly revenue in all its operating units on Tuesday, and forecast full-year earnings well below analysts' expectations due to the strong US dollar.

Its shares tumbled 6.7 per cent in after-hours trading.

HP's revenue dropped 4.7 per cent to $26.84 billion in the first quarter ended January 31. Revenue from the tech major's enterprise services unit declined 11 per cent.

The company's net income fell to US $1.37 billion, or 73 cents per share, from US $1.43 billion, or 74 cents per share, a year earlier.

Excluding items, the company earned 92 cents per share.

Analysts on average had expected a profit of 91 cents per share and revenue of US $27.34 billion, according to Thomson Reuters I/B/E/S.

HP shares fell 6.7 per cent to $35.90 in after-hours trading. Up to Tuesday's closing price of US $38.49, the stock had risen 9.3 per cent since the company announced the split in October.

The world's second largest PC maker, which has struggled to adapt to the new era of mobile and online computing, is preparing to split into two listed companies later in 2015, separating its computer and printer businesses from its faster-growing corporate hardware and services operations.

"Revenue was a little short on the top end, the guidance for the second quarter was a little below where the consensus was," said Daniel Morgan, a portfolio manager at Synovus Trust.

"Let's wait till October, see if this split is really going to create the shareholder value that (CEO) Meg Whitman is hoping for," Trust added.

HP has not projected the total cost of its separation plan, but said on Tuesday it will amount to about US $1.50 per share in the current financial year, which works out at about US $2.7 billion overall, although some overseas tax-related costs will be recuperable.

The combined effect of those separation costs and the hit from the strong dollar will almost halve HP's free cash flow this fiscal year to about $3.5 billion to $4 billion, down from three months ago when it forecast US $6.5 billion to US $7 billion.

Palo Alto-based HP follows Microsoft and International Business Machines (IBM) in seeing a negative impact from the strong dollar. HP took about two-thirds of its revenue from outside the United States in the financial year ended October 2014. The dollar had risen 14.7 per cent in the last six months through Tuesday.

HP said it expected adjusted profit of US $3.53 to US $3.73 per share for the full year ending October, due to a 30 cents per share hit from currency, well below analysts' average estimate of US $3.95.

(Reuters)