H-P’s Focus on the Bottom Line
H-P provided a glimpse at how large tech companies will ride out the downturn: cut costs to cover for slumping sales.
The computer giant announced preliminary results for its fiscal fourth quarter Tuesday, including revenue of $33.6 billion, and earnings-per-share of $1.03, excluding special charges. Both numbers surpassed analysts expectations. But the real tell was the companys forecast for the current quarter and its 2009 fiscal year. The story there: revenue will be lower than analysts expected; income will be higher.
H-P deferred all comments until Monday, when it was originally scheduled to report earnings; an H-P spokeswoman also declined to comment for this post. But obviously the only way to improve the bottom line while the top line shrinks is to cut costs. And H-P is aggressively doing that. For example its laying off more than 24,000 employees as part of its acquisition of technology-services company EDS. Its also shutting down for two weeks around Christmas, a week longer than normal.
Cutting costs during a downturn isnt rocket science, obviously. But it helps to have a lot of room to make cuts, like H-P does. Thats another lesson: Making acquisitions just before a major economic downturn is probably a good thing, if only because the same number of sales people now have more products to sell.
Meanwhile, expect other large companies like IBM and Oracle to release forecasts showing a similar emphasis on controlling costs.
-Ben Worthen
Source: WSJ.com: Business Technology