The move, announced by CEO Carly Fiorina in a conference call with analysts, comes as the number of positions slashed over the past year reaches 16,600 of a planned 17,900 resulting from the supplier's acquisition of Compaq Computer.
HP also reported on Tuesday second-quarter earnings and revenue that topped analysts' expectations, due largely to profit improvements in its computing businesses.
"Although we are pleased with the (progress) of our enterprise systems business we still have more work to do," Fiorina said, adding that the services industry is also seeing weak demand.
HP said it earned US$659 million, or 22 cents per share, on revenue of US$18 billion for the three months ended April 30. In the same quarter a year ago, the company earned US$252 million, or 13 cents per share, on revenue of US$10.6 billion. However, those earlier results exclude the performance of Compaq Computer, which HP acquired in May 2002.
Excluding certain charges, HP said it would have earned 29 cents per share. On that basis, analysts were projecting earnings of 27 cents per share on revenue of US$17.7 billion, according to earnings tracking firm First Call. In February, the Palo Alto, Calif.-based company forecast earnings of 27 cents per share, in line with what analysts were projecting at the time.
"One year after the merger, we've reduced structural costs by US$3.5 billion on an annualised basis. Our business model is generating a more balanced revenue and profit mix, and our operating cash generation capabilities--more than US$2.5 billion this quarter--are proving to be stronger than ever," Fiorina said in a statement.
The technology giant did not give specific guidance for the current quarter, but said it was comfortable with consensus estimates that it would have revenue of US$36.4 billion and per share earnings of 62 cents, excluding charges, in the second half of the fiscal year. "We see no short-term catalysts for improvements in IT demand but HP continues to execute well," Fiorina said in a conference call with analysts.
As for the just-reported quarter, HP said it narrowed the loss in its Enterprise Systems Group--which includes servers, storage and software--to US$7 million, down from US$83 million a quarter ago. Revenue was US$3.86 billion, up from US$3.74 billion last quarter.
In its PC business, sales dipped slightly to US$5.12 billion from US$5.14 billion. The unit remained in the black, although profits dipped to US$21 million from US$33 million in the prior quarter.
The company would not provide last year's numbers for its business segments on either a combined company or a stand-alone basis.
Sales in the printing and imaging business fell slightly, to US$5.52 billion from US$5.61 billion. Profits, however, rose to US$918 million from last quarter's $907 million result. In the services business, sales climbed to US$3.03 billion from US$2.96 billion in the prior quarter, contrasting operating profits, which declined to US$301 million from US$341 million.
HP's financing business had revenue of US$501 million in the quarter, down from US$517 million in the prior quarter, with profits climbing to US$21 million from US$14 million.
HP also listed a business category called "corporate investments" that had revenue of US$84 million and a loss of US$44 million. In addition to its operating units, HP posted a US$12 million loss on investments and had US$66 million in costs not allocated to a specific business. The company also had US$234 million in restructuring costs, as well a number of various acquisitions related and other items.
A year after HP acquired Compaq Computer, many analysts praise the company for its cost-cutting but still question whether the company is any better positioned to compete against IBM's breadth and Dell Computer's efficient sales model.
Dell retook the PC sales crown from HP in the first quarter. Aided in part by a controversial change in accounting, HP said it returned its PC business to profitability last quarter.
The company has been trying to tweak its strategy in the enterprise space, where it has been struggling to return to profitability. It shuffled some executives earlier this month, but said it remains on track to make money by the end of its fiscal year in October.
As for the overall economic outlook, Fiorina told analysts that it is different for different parts of the world.
"The U.S. appears to be stable, but (there is) no catalyst for improvement," Fiorina said. "Europe now appears to be beginning to weaken. Asia continues to move along here. We have seen no impact of SARS (severe acute respiratory syndrome) to date."
Melanie Hollands, president of hedge fund firm Koala Capital, said that HP's results and outlook are benefiting from a weak dollar as well as a lower tax rate.
"HP continues to endure weakening demand across most of its product segments, and ongoing distractions from operations, as a result of reorganisation," Hollands said. "Although HP has significant technology assets and a substantial base of stable, profitable revenue from both its printing and supplies segments, these positives appear all but offset by ongoing pressure from increased competition, commoditisation, execution challenges and lack of strategic focus--which all comes within the context of a weak economy and continued declines in overall IT spending."
