HP's Q1 Profit Down 9.5%, Company Cuts Salaries

Doesn't put the blame on the netbook business


Palo Alto, California-based HP, the world's leading PC vendor, has recently announced the financial results for the fiscal first quarter ended on January 31, 2009. According to the company, the net revenue for the first quarter of 2009 was of $28.8 billion, up 1% from the company's earnings in the same period a year earlier and up to 4% when adjusted to the effects of the currency. As expected the company's financial results were affected by the ongoing world economic crisis, which has been cutting through the sales of almost every major company out there.

“HP is a market leader executing well in a tough market,” said Mark Hurd, HP chairman and chief executive officer. “Our market strength, disciplined cost management and diverse portfolio allowed us to differentiate HP in the global marketplace and gain share in key markets.”

According to the numbers presented by the company, the profit was at $1.9 billion, or 75 cents per share, which is 9.5 percent down from the profit recorded by the company in the same quarter, a year ago, at $2.1 billion, or 80 cents per share. The PC vendor recorded revenue declines in every area of its business except for its EDS unit, which it purchased last year. The unit recorded a revenue increase of 116 percent to $8.7 billion.

“I'm particularly pleased with the results of our Services segment. We now have a second segment with significant recurring revenues,” Chief Executive Mark Hurd said during a call with analysts.

Unfortunately, the company's revenue from the notebook business has dropped 13 percent, while in the desktop business the revenue was down 25 percent. HP's total PC shipments were down 4 percent for the quarter. However, the company's chief executive took some time in discussing the effects of the netbook business on the company's sales of fully-fledged notebooks. “It's not a move to Netbooks that's cannibalizing in this quarter. What you have is someone who was buying more thickly configured notebooks now buying more thinly configured,” Hurd said. “There's not a significant phenomenon of ASPs (declining) in the HP lineup caused by Netbooks.”

There have been a series of expressed concerns regarding the netbook business segment, as these systems are said to be seriously affecting the sales of cheaper, fully-fledged notebooks.

According to the company, following the recent numbers for the first fiscal quarter of the ongoing year, HP will be reducing compensation and benefits across the board. Executive Council members will see a pay reduction of 15 percent each, while other execs will see about a 10 percent pay reduction. The company's chief executive's base pay will be decreased by 20 percent, while exempt employees' salaries will be cut 5 percent, with those of non-exempt employees reduced by 2.5 percent.

Following the recent numbers, HP said that it would forecast a revenue decline of 2 percent to 3 percent, between 84 cents and 86 cents per share.