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HP Numbers Worse-than-Expected

The recession and the global lack of demand have hit even the great and good HP

The recession and the global lack of demand have hit even the great and good HP, which turned in numbers Wednesday that were worse-than-expected.

Earnings were down 13% on revenue up just 1% in its fiscal first quarter ended January 31. It reported declines practically across-the-board except for software and services - it's thanking its lucky stars it bought EDS - and it cut its outlook.

CEO Mark Hurd said during the conference call that he doesn't expect things to get much better for the rest of the year.

The company made $1.85 billion, or 75 cents a share, in the quarter compared to $2.13 billion, or 80 cents, a year ago. Its sales of $28.8 billion were $3 billion short of Wall Street expectations and about $4 billion short of internal targets. Non-GAAP earnings of 93 cents were on the button.

Shares tumbled over 6% in after-hours trading.

HP's PC business was down 19% to $8.8 billion, with shipments down 4%. Previously unassailable notebooks were down 13%.

Hurd refused to consider that netbooks might be cannibalizing sales, saying he needed more data. He did claim they had no impact on the company's depressed ASPs.

He did complain that pricing was hard because of the speed of the currency decline.

Printer sales dropped 19% to $6 billion, with shipments down 33%. Supplies were down 7%; Hurd has doubts about where the inventory is.

Enterprise storage and servers were down 18%.

Software was down 7% to $878 million though software earnings were up almost triple to $140 million.

Service revenues were up 116% to $8.7 billion and earnings nearly doubled.

HP says it's fired 9,000 of the 24,000 people it said it would let go when it bought EDS for $13.2 billion last year and that its integration is ahead of schedule.

HP's gross margin was 23.4% with an operating margin of 10.8%, better than some thought.

This quarter the company thinks it can make 70 cents-72 cents net on revenues down 2%-3% to $27.5 billion-$27.7 billion. Wall Street, which may be smoking dope as it usually does, figured it was good for 89 cents on $30.95 billion.

The company pulled its revenue projections for the year by 2%-5% to roughly $112.4 billion-$116 billion, with an EPS target of $3.76-$3.88.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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