HP Expects Strong Profit
HP Inc. gave a strong profit forecast projecting optimism that a broad restructuring will pay off while spurning a takeover offer from Xerox.
Profit, excluding some items, will be $2.24 a share to $2.32 a share in fiscal 2020, the Palo Alto, California-based company said Tuesday in a statement. In the fiscal fourth quarter, the hardware maker’s sales and adjusted profit topped projections.
HP’s earnings report comes at a time the company is evaluating a buyout proposal by Xerox. Xerox said Tuesday it plans to go directly to HP’s shareholders, adding that HP’s refusal to engage on the $22-a-share offer “defies logic.”
On Sunday, HP reiterated its stance that it has many options to create value for shareholders, other than accepting the offer valued at more than $33 billion in cash and stock, and wasn’t “dependent on a Xerox combination.”
“The results show that our strategy is working and we’re driving both short- and long-term value creation,” Chief Executive Officer Enrique Lores said in a press briefing.
Fiscal fourth-quarter revenue came in at $15.4 billion, little changed from a year ago.
HP has announced a major restructuring to stabilize the company, which could result in as much as a 16% reduction of its workforce by the end of fiscal 2022.
“Related to Xerox, I feel like we have seen this movie before when Carl Icahn meddled with Dell in a similar way,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “Xerox is a third of the size of HP, has been steadily declining in revenue, is running out of options, and needs HP more than HP needs it.”
In the period ended Oct. 31, sales in the printing division fell 6% to $4.98 billion, with ink supplies dropping 7%. Consumer revenue declined 10% and commercial sales decreased 2%.
“We continue to lead in a tough market,” Lores said of the printing industry. “We continue to grow in the categories that we consider important,” such as managed print services and instant-ink delivery services.
Revenue from personal computers increased 4% to $10.4 billion, with 8% growth in commercial revenue offsetting a 4% decline in consumer sales. Corporate clients are upgrading their computers to adopt Microsoft Corp.’s Windows 10 operating system.