HP announced a $21.6 billion increase in quarterly revenue, leading to a 7 percent increase from second quarter results in 2004. The announcement, which was followed by a conference call, was a lukewarm victory for new HP CEO and President Mark Hurd and other HP principals who also had to answer numerous questions about the company’s low-price printer strategy, low supplies sales and workforce reduction measures.
Hurd began the conference call by announcing a $6.4 billion revenue increase in the company’s highly profitable Imaging and Printing Group, partially attributing its success to a 3 percent increase in consumer hardware sales and an 8 percent increase in commercial hardware sales. The commercial hardware was fueled by a 96 percent increase in color laser sales and a 61 percent increase in MFP unit sales compared to the previous year.
Despite the resulting success of the company’s low-price printer strategy, CFO Bob Wayman reminded call participants of a first-quarter statement that the company had “mispositioned, from a pricing point of view, some of our consumer products.” He later contended that the company’s goal is to “now get more back in line to correct a mispositioning in the marketplace that occurred six months or so ago.”
“Our strategy is to align hardware pricing to stimulate unit growth and in turn, drive higher-margin supplies,” Hurd agreed.
Hurd also announced that although supplies revenue grew 4 percent over the prior year, this disproportionately low percentage reflected “unit shipment weakness in recent quarters and the tough year-over-year compare.” He also said it would “take a few quarters to feel the benefit of a renewed push in hardware unit sales. … The hardware units drive supplies. … So we are trying to optimize that answer, and I think you should expect us to continue to push on that.”
The CEO was then asked about the $74 million said to be absorbed in voluntary workforce reduction costs and how it negatively affected the company’s overall profitability. He said the second-quarter results largely reflected these anticipated costs but later explained that “we’re in the process of reviewing every element of operations and cost structures, and nothing will be taken for granted.
“However, what is clear to me already, even at this early stage, is that hard work lies ahead of us if we are to get HP’s overall financial performance where it needs to be. … The reality is there is no quick fix to achieving the kind of performance that I think this company is capable of,” Hurd said. “You should expect to see an operational plan behind these comments in the next several months.” The CEO opted to “reserve further comment on these initiatives for now.”
