Hewlett-Packard Drops 17 Percent

Michael Bowler | RSS | Wed, May 20 2009 | 2 Comments

Computer industry leader Hewlett-Packard’s sales have dropped 17% for the quarter, their quarterly report indicated yesterday. HP products affected are personal computers and printer ink, indicating that consumers just still are not secure enough in their finances to shell money out for technological expenses they see as unnecessary. HP also said layoffs would occur for an additional 6,400 workers, or 2 percent of HP’s employee work force that totals over 300,000. The layoffs will be on the cusp of the announcement of 24,600 jobs HP was already dumping as part of its acquisition of Electronic Data Systems, a technology services provider they bought for $13.9 billion last year in order to compete properly with IBM.

The new job cuts will come from HP’s product departments. The affected departments produce PCs, printers, computer servers, ink and toner cartridges. The quarterly results, reported Tuesday after the market closed, puts into question whether technology spending has fallen as far as it’s going to in this recession. Hewlett-Packard is not optimistic as shares fell in extended trading and is laying off workers in an economy which has bottomed out in the way of job losses. Chief financial officer of Hewlett-Packard, Cathie Lesjak, said in a recent interview that it’s still “too tough to call” whether technological sales have bottomed out.

Hewlett-Packard’s major supplier, Intel, which deals primarily in computer electronic chips and microprocessors, reported bottomed out PC sales totals in the first three months of the year, but according to their quarterly report, sales were returning to normal patterns. HP says PC shipments stayed flat over the last several years, but revenue from those machines fell. The recession has caused retailers to cut prices on PCs in order to bring customers into the stores, which is one explanation for how HP can make less money on roughly the same number of computers. The growing popularity of “netbooks”, stripped down, cheaper, smaller laptops, also skews the numbers due to their excessive financial benefits for the consumer, bringing down profit percentages.

Laptop sales fell 13 percent to $4.7 billion. Desktop computer sales were down 24 percent to $3 billion. Some areas improved, particularly China and consumer sales in the United States. The last area to improve will likely be business sales, due to the fact that HP is one of the pricier computer manufacturers, likely due to excessive quality, coupled with the fact that in the economy we are in, individuals will be much more likely to upgrade their computers before corporations will upgrade their systems.

In HP’s printer division, overall sales were down 23 percent to $5.9 billion. Within that, the supplies revenue, which includes ink, fell 14 percent. Lesjak said the printer/ink sales decline was only partially caused by demand (or lack thereof) from users. She said a big reason for the decline was that HP adjusting the amount of ink retailers retained in inventory.

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Tags: netbooks, electronic chips, technology services provider