Hewlett-Packard Co.’s 19 percent drop in quarterly profit shows that the company still relies heavily on printer ink and the troubled personal computer market, despite the aggressive transformation it’s undertaking to branch out and encroach more on rival IBM Corp.’s turf.
IBM, which ditched its PC division as part of a major facelift over the past 15 years, now makes most of its money from software and services. With its $13.9 billion acquisition last year of technology services company Electronic Data Systems, HP now too is heavily invested in services — they are its biggest revenue and profit generator.
But HP’s latest quarterly numbers, reported Tuesday after the market closed, show the companies are still very different.
HP’s profit dropped in large part due to ongoing weakness in sales of PCs and printer ink — two areas IBM isn’t in. Still, HP edged past Wall Street’s profit and sales forecasts — something CEO Mark Hurd has done most quarters in his 4 1/2 years at HP’s helm.
Expectations were high going into Tuesday’s report: HP’s stock has risen 75 percent since March. Although the results edged out analysts’ estimates, investors sent shares down 96 cents, or 2.2 percent, to $43 in extended trading. The stock closed Tuesday’s regular session up 85 cents, or 2 percent, at $43.96.
The numbers were good and “the guidance is a relief,” said Jayson Noland, an analyst with Robert W. Baird & Co. “Their commentary though is what I would focus on: conditions are stabilizing, and some of the cyclical businesses should show a rebound next year.”
But HP offered “no big surprises, ho hum,” he added. “I don’t expect the stock to do much one way or the other. (The stock) has been very strong.”
Ink has long been HP’s cash cow, but is coming under pressure from generic, cheaper brands….