Hewlett-Packard announced its second quarter results this week, numbers that one business news source said were sparked by a leaked internal memo about inevitable layoffs and cost controls.
Channel News reported that "CEO Leo Apotheker issued a gloomy secret memo warning executives that tough times are ahead," and "a Q2 financial report was rushed out following the leaking of Apotheker's memo." HP quarterly report dates, attended by dozens of stock analysts plus the public via WebEx meets, are usually planned many months in advance.
The HP Q2 numbers were respectable and even beat market analyst forecasts by a few cents per share. But HP trimmed back its 2011 forecast for total revenues by $1 billion, a reduction of less than 1 percent of its previous forecast. Sales from the Business Critical Servers divison, where HP-UX Integrity servers are built and sold, were virtually flat at a 1 percent increase. The HP-UX and Integrity sales now make up the smallest share, at 10 percent, of the ESSN operations. ProLiant business powered by Linux and Windows makes up 61 percent of the quarter's revenues.
However, with a 1 percent increase, Q2 marks the second straight quarter where these replacement systems for the HP 3000 have posted no decline in sales. Operating profits for the Enterprise Servers, Storage and Networking unit, which includes the HP-UX alternatives of Windows and Linux servers, increased by about 1.5 percent of operating revenue.
But the memo cited by Channel News said that Apotheker has forecast hard times ahead for a company so large that it employs more than 300,000 and will sell about $130 billion in its fiscal year.
Apotheker told top executives that he's bracing for "another tough quarter" in the July period and urged his deputies to 'watch every penny and minimise all hiring." The memo indicated that the company is continuing to come under pressure and that job cuts are now inevitable. Apotheker said the company's existing headcount plans are "unaffordable, given the pressures on our business."
"Q3 is going to be another tough quarter, one in which we will be driving hard for revenue and profit," Channel News reported that he wrote. "We have absolutely no room for profitless revenue or any discretionary expenditures."
(Click for more detailed view.)
This ownership breakout of HP shares isn't a new development, but it shows that large voting blocks control the reactions to the HP forecasts and reports. In the day after the report, investors sold down the stock by about 10 percent, ending at $36.50. The stock has not rebounded since Apothker's team took over, following former CEO Mark Hurd's ouster.
HP noted that its enterprise businesses, rather than consumer PCs and services units, lifted the company's recent quarter.
"Continued strength in commercial businesses resulted in commercial revenue increasing 8 percent year over year, with Enterprise Servers, Storage and Networking revenue up 15 percent, Software revenue up 17percent, and commercial PC Clients and Printers revenue up 13 percent and 7 percent, respectively.
Total revenues for HP in the latest quarter were $31.6 billion, up just 1 percent over Q2 of 2010 when adjusted for affects of currency changes. The company grew its profits by 14 percent over the prior year's quarter, beating analyst estimates by a penny per share.