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HP profit drops 17 per cent

The Associated Press

SAN FRANCISCOHewlett-Packard Co.'s quarterly profit dropped 17 per cent on lighter sales in two key areas, personal computers and printer ink, in a sign that the woes in consumer technology spending have dragged on beyond the miserable holiday season.

The company also said an additional 6,400 workers, or 2 per cent of HP's 321,000-employee work force, will lose their jobs over the next year as part of HP's digestion of Electronic Data Systems, a technology services provider HP bought for $13.9-billion (U.S.) last year to mount a bigger challenge to International Business Machines Corp.

HP was already dumping 24,600 jobs as part of that acquisition before the extra cuts were announced Tuesday.

HP's results, reported Tuesday after the market closed, muddies the picture of whether technology spending has fallen as far as it's going to in this recession. HP's outlook was not optimistic, and its shares fell in extended trading.

HP's chief financial officer, Cathie Lesjak, said in an interview that it's still “too tough to call” whether PC sales have hit a bottom.

That differs from what one of HP's major suppliers, Intel Corp., said last month. Intel's chief executive officer, Paul Otellini, said PC sales had “bottomed out” during the first three months of the year and appeared to be returning to normal patterns.

HP is the world's No. 1 seller of PCs, while Intel is the world's biggest supplier of microprocessors, the calculating engines of PCs. Perhaps more telling is that the last quarter at HP ended April 30, so its analysis is based on later information than Intel had.

Palo Alto, Calif.-based HP said it earned $1.72-billion, or 70 cents per share. Excluding restructuring and other one-time charges, HP earned 86 cents per share. Analysts were expecting a profit of 86 cents per share, but HP said it beat Wall Street's forecast because it included 2 cents per share of charges related to a patent dispute that analysts didn't factor into their estimates.

Sales fell 3 per cent to $27.4-billion, which matched analyst estimates. HP says sales would have been up 3 per cent were it not for currency fluctuations.

HP says PC shipments stayed flat year-over-year, but revenue from those machines fell. The recession has caused retailers to slash prices on PCs to lure customers into the stores, which is one explanation for how HP can make less money on roughly the same number of machines.

Laptop revenue fell 13 per cent to $4.7-billion. Desktop computer sales were down 24 per cent to $3-billion.

In HP's printer and printer-ink division, overall sales were down 23 per cent to $5.9-billion. Within that, supplies revenue — which includes ink — fell 14 per cent. Ms. Lesjak said the decline was only partly caused by weakened demand from users. A big reason for the decline was HP adjusting the amount of ink it had in resellers' inventory, she said.

HP kept its profit forecast at $3.76 to $3.88 per share for fiscal 2009, stripping out one-time charges. But it also indicated a sharper sales decline was in sight. After previously predicting that its full-year sales would decline 2 per cent to 5 per cent, HP narrowed that range Tuesday to 4 per cent to 5 per cent.

HP shares fell $1.66, or 4.5 per cent, to $34.92 in extended trading. Before the results were announced, HP closed up 85 cents, or 2.4 per cent, in regular trading at $36.58.

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