HP CEO hails business split progress amid downbeat Q2 revenue slumps

Despite chalking up revenue declines in several business units, Meg Whitman is more convinced than ever of the need to breakup HP

Hewlett-Packard (HP) has posted a downbeat set of financial results, with several of its business units notching up revenue declines and its Enterprise Services subsidiary suffering the most.

Net revenue was down 7% year-on-year and fell to $25.5bn during the second quarter of its 2015 financial year, after the firm chalked up revenue drops in each of its major business units.

The largest slump occurred in HP's Enterprise Services division, which suffered a year-on-year drop of 16%, while the Printing and Personal Systems group suffered a 6% drop compared with 2014’s Q2.

Revenue was also down 8% year-on-year for its software division, and by 1% for its Enterprise Group compared with Q2 in 2014.

Despite the results, the company’s share price went up 1% in after-hours trading, buoyed by an earlier announcement about HP’s plans to embark on a joint venture with Tsinghua University in China.

The move will see the university acquire a 51% stake for $2.3bn in a new enterprise that brings together HP’s H3C technology and its China-based server business.

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During a conference call to discuss the results, HP CEO Meg Whitman said the move has big implications for the future of the Chinese technology market.

“The combined company will build on H3C’s extensive and valuable patent portfolio, best-in-class products and customer focus, and Tsinghua’s world-class research capability,” she said, on a call transcribed by Seeking Alpha.

“In one move we have repositioned HP, and shifted the entire technology landscape in the critical Chinese market, to accelerate our overall performance and better serve our customers and partners,” she added.

Whitman also spoke in favour of the progress the company is making with its plans to separate into two publicly traded business entities: one comprised of its consumer PC and printing operations, and the other focused on enterprise hardware, software and services.

The past six months have reinforced Whitman’s conviction that this is the right path for the company to take, and the split is still on course to occur before the end of the firm’s financial year.

Catherine Lesjak, chief financial officer and executive vice president of HP, said the company’s overall aim is to achieve an operating profit of between 7% to 9%, but doing this will require cutting the organisation’s gross annualised costs by $2bn over the next three years.

“Given the progress on efficiencies and expected quarterly seasonality, we remain confident in our full-year operating profit outlook of 4% to 6%,” she said.

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