Tech giant Hewlett-Packard (NYSE: HPQ), led by CEO Meg Whitman, prematurely released its Q2 earnings report prior to the closing bell yesterday May 22, 2014.
HP reported Non-GAAP earnings of 88 cents, 1 percent higher than last year’s Q2, but their revenue dropped by about the same amount with the street expecting at least $27.41 billion but reporting only $27.3 billion. Whitman had previously stated that she is taking HP on a “multi-year journey” to restructure and regrow HP to its former glory.
HP has seen a majority of its products drop in revenue on a year over year basis with personal systems being their brightest point rising up 7%. The market’s initial reaction to the early earnings report was negative, seeing the stock go from $33.32 and closing at $31.78.
The earnings report also came with some more bad news. HP announced that it would be cutting 11,000-16,000 jobs, that is in addition to the 34,000 layoffs the company announced earlier. That is more than 10% of its current employee pool of 317,500 worldwide.
This morning, Whitman appeared on CNBC, coinciding with the stocks turnaround. Gapping up to $32.31 and hitting a six month high of $34.09, Whitman’s assurances that HP is on schedule for its regrowth program seem to have worked. The CEO said, “We feel good at the midpoint of our (five-year) turnaround plan,” and “Stabilization of revenue, cash flow, network security, big data, innovation, R&D spending — I feel good about where we are.”
Whitman also detailed HP’s 3D printing initiative, which most warned against. She said, ”We’re focused on business 3D printing, not consumer 3D printing. We’ll announce a 3D printing technology at the end of this year, and we think there’s a real opportunity here.” and described the 3D printing sector as a great opportunity of growth,” This (3D printing) is an acorn that we’re planting that will become an oak tree in the future. This is a business we need to be in. It’s very consistent with our heritage, but we’re doing that in a lot of businesses. You know, innovation, you have to plant those acorns before they become oak trees and you have to have patience in terms of development cycles. You have to continuously and consistently invest in R&D.”
Though the market has taken the news well, the real indicator on how HP’s future looks, will be after this long weekend. HP’s revenue and EPS essentially cancel each other out, but its outlook and regrowth seem to be the catalyst for this slight and immediate uptick.
One has to keep in mind how HP will compete with other 3D printing companies like 3D systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS). Though HP will be focusing on commercial application, the other two big names in 3D printing reported all of their revenue generated from the commercial and enterprise level.
It will be curious to see if HP rethinks its stance on personal 3D printing since they have already became a household name in the desktop printer market. They may also be able to provide lower end products at a cheaper price point than their competitors whose current low level products range from $1395-$999.