HP's profit slips 21 per cent as services business stumbles

The company says its on track to divide into two companies in November

Hewlett-Packard has reported another drop in quarterly revenue and profit, with a notable 16 percent slide in its enterprise services business.

The company said it's on track to divide itself into two companies later this year, but made a last minute change to its leadership plans: CFO Cathie Lesjak will move to HP Inc., the division that will sell PCs and printers, and not to HP Enterprise, as originally planned.

HP has been trying to expand its business for a few years without success, and the split is a bold gambit to see if can perform better as two companies. Revenue slipped 7 percent in the quarter ended April 30, to $US25.5 billion -- its 15th straight quarter of declining sales.

HP's PC business, which had been doing relatively well thanks to upgrades sparked by the end of support for Windows XP, contracted by 5 per cent from a year earlier, and its printer business, where HP gets much of its profit, shrank by 7 percent, the company announced Thursday.

It enterprise business also declined, with storage and network sales both down from last year. Its industry standard server business was a bright spot, growing 11 per cent.

But HP's enterprise services division, which generates nearly a fifth of its overall business, reported a sharp drop in sales, to $US4.8 billion from $US5.7 billion a year earlier.

HP's profit for the quarter was $US1.0 billion, down 21 per cent from the same quarter in 2014. Excluding costs of $US585 million related partly to the upcoming separation, HP reported earnings per share of $US0.87, in line with its own reduced forecast.

HP announced last year that it will break in two, with HP Inc. selling PCs and printers, and HP Enterprise selling data center equipment, software and enterprise services. Meg Whitman will be CEO of HP Enterprise, while Dion Weisler, who leads the PC and printing group today, will run HP Inc.

As CFO of HP Inc., "Lesjak's deep expertise will best serve Dion and his team as they embark on creating a new company," HP said Thursday. The CFO of HP Enterprise will now be Tim Stonesifer, who's currently CFO of HP's enterprise division. He was previously CFO for General Motors International Operations, in Shanghai.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com

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