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HP Q2 PC Segment Sales Flat, Profit Dips

5/21/2003 12:31:00 PM Eastern

Palo Alto, Calif. - Hewlett-Packard (HP) registered what it called 'a solid performance' in its personal systems group during its fiscal second quarter, despite IT spenders continuing to keep their hands in their pockets.

Sales of desktop PCs and notebooks hit $5.12 billion during the period, about flat compared with the $5.14 billion registered in the previous three months.

Second quarter PC segment revenue reflected gains in the commercial market, despite continued softness in IT spending, said HP. Growth in notebooks, commercial desktops and workstations was offset by seasonal weakness in U.S. consumer desktops and handheld devices, it said.

Although personal systems group sales held its own in the second quarter, ended April 30, and the group sustained its profitability, earnings from operations did drop to $21 million, down from the operating profit of $33 million recorded in the preceding quarter.

Following its year-ago union with Compaq Computer, HP no longer considers its financials purely the result of melding two businesses. 'One year after the merger, we've reduced structural costs by $3.5 billion on an annualized basis,' said Carly Fiorina, chairman/CEO.

'Our business model is generating a more balanced revenue and profit mix. Today, HP emerges from the integration a stronger, bolder competitor with our sights set firmly on leadership and growth,' she said.

However, it addition to the nearly 18,000 jobs HP cut during the merger process, the company announced it will eliminate another 3,500 workers during the second half of the year, but balance this with 4,000 jobs added in other parts of the company. Fiorina stressed HP's actions from this point on are part of an ongoing managing process, rather than a holdover from integration.

Consolidated HP revenue in the second quarter inched up 1 percent, to $18 billion, compared with $17.9 billion in the preceding quarter, but down slightly from the combined $18.2 billion year-on year.

Including special items, second quarter net earnings totaled $659 million, compared with $721 million in the preceding three months, but $252 million year over year, prior to the $19 billion merger.

On a regional basis, revenue in the Americas remained flat sequentially at $8.1 billion, a figure representing 45 percent of total company revenue.

For the second half, HP estimated its will record $36.4 billion in revenue. Analysts expect this to be divided $17.5 billion in the third quarter and $19 billion in the fourth.