Hewlett-Packard (HPQ, news, msgs) today said its fiscal second-quarter profit fell 17% as the PC market remained soft and corporations cut back on IT spending.
The company reported earnings of $1.7 billion, or 70 cents a share, down from $2.1 billion, or 80 cents a share, a year earlier. Sales fell 3% to $27.4 billion.
While the financial results matched Wall Street's expectations, HP shares slid nearly 4% in after-hours trading as the company said it foresees a sharper sales decline for fiscal 2009. The company did, however, maintain its full-year profit forecast at $3.76 to $3.88 a share.
The company also said it would lay off another 6,400 workers, about 2% of its global work force, as part of its $13.9 billion acquisition in August of computer-services company EDS.
Major indexes were mixed today. The Dow Jones Industrial Average ($INDU) shed 29 points to close at 8,475 after surging 235 points Monday. The Nasdaq Composite Index ($COMPX) rose 2 points to 1,735, and the Standard & Poor's 500 Index ($INX) was off 2 points to close at 908.
Crude oil hit a six-month high of $60.48 a barrel this morning before pulling back a bit on concerns that it's still too early to reliably forecast a sustained increase in energy demand. Crude gained 52 cents to $59.55 in New York.
Energy prices may move Wednesday when the government reports how much crude and gasoline is now in storage.
Looking for a bottom to PC market
Hewlett-Packard provides personal computers, printers, servers and storage technology to individual and enterprise customers. These products accounted for more than three-fourths of revenues in fiscal 2008; its consulting services generated nearly one-quarter of revenues. But the services business is growing, and saw revenue rise 99% to $8.5 billion in the most recent quarter.The services side of the business got a boost from the EDS deal, which was made to help HP compete with IBM (IBM, news, msgs) for the business of IT consulting and outsourcing. HP earlier announced that more than 24,000 employees would be laid off as a result of the acquisition.
Several analysts had expressed optimism that HP could wring synergies from the EDS deal, but there was also sentiment that the price tag was steep, given IBM's head start and price pressures exerted by low-cost rivals in India.
HP also faces challenges from Oracle's (ORCL, news, msgs) pending purchase of Sun Microsystems (JAVA, news, msgs), as well as the move by Cisco Systems (CSCO, news, msgs) into the market for computer servers.
HP's chief financial officer, Cathie Lesjak, told The Associated Press today that it's still "too tough to call" whether PC sales have hit a bottom.
The company is the world's biggest PC maker, with a 20.5% share of the market in the first three months of 2009. The company said its computer shipments were up almost 3% in the period. It is No. 2 in the U.S. market, behind Dell (DELL, news, msgs), which has expanded its lead in the U.S. with a more diversified retail strategy.
Global PC shipments fell 7% in the first three months of 2009, according to market-research firm IDC. One bright spot in the PC market -- the rise of low-end portable computers called netbooks -- delivers thinner profit margins for the manufacturer.
PC manufacturers got some encouraging news today form chip maker Intel (INTC, news, msgs), which provided details about new versions of its Atom chip and Moblin operating system for netbooks that can lower prices for computer makers, as well as reduce power consumption by the devices.
More from MSN Money
A silver lining in housing report
An ugly headline on housing starts tossed cold water on the emerging investor sentiment that the worst may be over for the housing sector. But behind this morning's headline, the news was not so bad.Housing starts fell 12.8% in April to a seasonally adjusted 458,000, the Commerce Department reported. While that was the lowest level since records were first kept, in 1959, and lower than expectations of 520,000 starts, the plunge was attributed mainly to multifamily housing construction, down 46.1% to 78,000 -- a record low and the biggest drop since January 1994.
Starts of single-family homes rose 3.6% to 373,000, the biggest increase since February 2007.
"The single-family housing market, which is where the bulk of the inventory overhang resides, continues to show encouraging signs of stabilization," Nomura Securities chief economist David Resler wrote in a note this morning.
Housing starts are down 54.2% in the past year, but some economists think the housing supply is failing to keep up with population growth, and that government efforts to stimulate the market will have a positive effect on demand.
"It increasingly looks like January was the bottom for home sales (new and existing), homebuilder confidence and single-family housing starts. This is important because . . . housing also serves as a leading indicator of the economy," MKM Partners economist Michael Darda said in a note to clients.
On Monday, the National Association of Home Builders said its index of homebuilder sentiment rose to an eight-month high. The builders are optimistic about the U.S. government's efforts to address the housing crisis -- the government has allocated billions of dollars to modify troubled mortgages and to help homeowners refinance into new loans even if their homes are worth less than they owe.
Meanwhile, the drop in home prices means homes are more affordable for many Americans. Nearly 73% of all homes sold in the United States during the first three months of 2009 were considered affordable, according to the Housing Opportunity Index, an analysis of housing markets by the NAHB and Wells Fargo (WFC, news, msgs) -- the highest percentage in the index's 18-year history.
Affordable generally means that a family making the median national income of $64,000 could buy the property without putting more than 28% of their gross income toward monthly housing costs.
Senate passes credit-card reform bill
The Senate today voted 90-5 to prohibit credit-card companies from arbitrarily raising interest rates on existing balances and charging certain fees."The Senate bill is a major step forward for consumer protections, and it's very likely that it will become law before Memorial Day," Ed Mierzwinski, consumer program director with U.S. Public Interest Research Group, told MarketWatch.
The House of Representatives is expected to take up the legislation Wednesday, and President Barack Obama could sign the bill into law by the end of this week.
Credit card companies have been slammed by record default rates as a result of the economic downturn.
Charge-offs, which are loans the banks don't expect to be repaid, averaged 9.01% in April, a 72% jump from the 5.24% average seen in April 2008, according to data compiled by Bloomberg.
American Express (AXP, news, msgs) on Monday said it will cut 4,000 jobs, or about 6%, of its global work force. The New York company announced 7,000 job cuts in October; together with reduced spending on marketing and business development, the company expects to save a total of $2 billion.
Shares of AmEx, a Dow component, were off $1.34 or 5.1%, to $24.79 today.
Home Depot reiterates forecast
Home Depot (HD, news, msgs) followed in rival Lowe's (LOW, news, msgs) footsteps this morning and posted a better-than-expected first-quarter profit.The nation's largest home-improvement retailer said it expects fiscal 2009 sales to fall 9% and full-year earnings from continuing operations to decline 7%.
Home Depot shares fell $1.39, or 5.3%, to $24.63 today.
"Our markets, and the consumer in general, remain under pressure," Chief Executive Frank Blake said in a statement.
The housing slump and weak economy have caused many consumers to pull back on big-ticket home improvement projects, instead focusing on small-ticket items like fertilizer and paint. Sales of items that have higher profit margins, like refrigerators and riding lawn mowers, have been weak at both Home Depot and Lowe's.
Goldman, JPMorgan and Morgan Stanley to pay back TARP
Three more banks want out of the government's hands.Goldman Sachs (GS, news, msgs), JPMorgan Chase (JPM, news, msgs) and Morgan Stanley (MS, news, msgs) are preparing to pay back their combined $45 billion in Troubled Asset Relief Program funds, according to Bloomberg News.
"It really is a way for them to break from the herd," Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors, told Bloomberg. "It's a great way to attract customers, personnel, capital."
The banks still need approval from the Federal Reserve.
Meanwhile, JPMorgan CEO Jamie Dimon this morning said that he sees the government allowing some TARP repayments "in the next couple of weeks." Dimon said JPMorgan is willing and able to pay back the TARP funds.
Dimon also said it is possible that the bank can revisit its dividend by the end of the year. JPMorgan, like many other banks struggling to raise cash, cut its dividend in February to 5 cents per share from 38 cents per share.
Saks posts smaller-than-expected loss
Shares of luxury retailer Saks (SKS, news, msgs) rose 17 cents, or 17.9%, to $4.81 today after the company reported better-than-expected first-quarter results. The New York company lost $5.1 million, or 4 cents per share, in the quarter, down from profit of $17.3 million, or 12 cents per share, last year. Revenue declined 27% to $621.3 million, and same-store sales slumped nearly 28%, as consumers continued to spend less on discretionary items in the quarter.Saks has taken steps to cut jobs and expenses to try to combat the recession, "carefully managing inventories, expenses and capital spending," CEO Stephen Sadove said in a press release.
The company has cut 1,100 jobs and said it will cut merchandise orders by 20% in 2009. Inventories declined by 7.3% in the quarter, and expenses were reduced by about 20%, the company said.
Andrew Rosenbaum contributed to this report.
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