SAN FRANCISCO (AP) — Hewlett-Packard Co., the biggest maker of PCs and printers, has made itself over with a new CEO and a focus on technology services, a transformation not entirely unlike IBM’s a decade ago. Yet HP’s legacy PC business will likely be a major focus when the company reports quarterly results on Thursday. It’s for the fiscal third quarter, which ended July 31.
WHAT TO WATCH FOR: PCs are HP’s biggest revenue generator, even though among the major divisions, it’s the company’s least profitable per dollar of revenue. The PC markets in the U.S. and Europe are contracting, dragged down by weak consumer spending that has overshadowed a wave of corporate spending on post-Great Recession technical upgrades. Those troubles are cause for concern for many investors.
Analysts will be watching closely to gauge how HP is managing the PC industry’s distress as it aggressively expands into smartphones, computer networking and other areas.
It will also likely face questions about its momentum in tablet computers. HP’s decision last week to cut $100, or up to 20 percent, from the price of its TouchPad tablets was seen by many analysts as necessary to stay competitive with Apple Inc.’s iPad, which popularized tablets and has so far defined what a successful product looks like.
Another concern HP will likely address is its services business. HP’s new CEO, Leo Apotheker, has said the business needs an overhaul to undo what he described as years of neglect. HP cut its full-year earnings forecast last quarter in part because of the costs expected with that transformation into focusing on higher-margin deals. Unlike IBM, which ditched its PC business, HP is still heavily reliant on computer hardware, which generates big revenue but little profit.
WHY IT MATTERS: As the No. 1 maker of PCs and printers, HP is a bellwether for both industries. It is a major player in services, an industry led by IBM, and it is making inroads in its other new markets. Investors are interested in monitoring how one of Silicon Valley’s oldest technology companies, which is now the biggest technology company in the world by revenue, adapts to a changing market.
WHAT’S EXPECTED: Analysts polled by FactSet expect HP to have earned $1.09 per share, excluding special items, on $31.2 billion in revenue.
LAST YEAR’S QUARTER: In the same quarter a year ago, the company earned $1.08 per share, excluding items, on $30.7 billion in revenue.