Europe drags HP profits down 19 percent

In its quarterly financial report HP has said that it sees the technology market stabilising but says that Europe is still weak.

Overall profits fell 19 per cent for the quarter, to $1.6bn. Revenues grew by eight per cent in the US, but fell 12 per cent in Europe, the Middle East and Africa. Asian revenue was down two per cent, despite strong growth in China.

“I’m pleased with our execution in a tough business climate,” said HP’s chief executive in a conference call.

“The US market is now stable, but we have yet to seen the same in Europe. Meanwhile some areas, such as China, are seeing double digit growth.”

The biggest, indeed only growth sector for HP this quarter was the services market, with sales up 93 per cent to $8.5bn. This was primarily down to EDS, which he described as making “excellent progress” and said there were still cost savings to be made in that division.

The PC market was faring less well, with sales revenue falling 18 per cent, despite a two per cent growth in shipments. Desktop PC sales fell 26 per cent while notebook sales fell by 10- per cent.

Server revenue was down 23 per cent while storage revenue fell by 21 per cent. Despite this the storage and servers division made a profit of $356 million.

The printing division also suffered, with commercial and consumer printing revenues falling 37 per cent and 21 per cent respectively, with commercial printing shipments falling by nearly half. However, on the supplies side Hurd said that customers weren’t cutting back too much compared to last year.

But the continuing weakness of the European market will be a worry for some. Cathie Lesjak, HP’s chief financial officer, said that the region still had some way to go before becoming a growth area for the company.

“Europe continues to be the most challenging region,” she said.

“The US continues to stabilise. While we’d like to see more stabilisation in Europe we are encouraged by US and China.”