HP Tries To Exorcise Mark Hurd's Ghost with Strong Earnings

When HP (HPQ) gave to boot to CEO Mark Hurd, it also made sure to release preliminary results. It was the clear influence of the PR advice the company had obtained as part of the decision to remove the CEO. When trouble comes, see if you can distract the public, so end the bad news release with the expected good numbers.

That's what HP did, so today's official earnings report was largely an anticlimax -- any corporation that couldn't meet the guidance it gave a week before would be in pretty sad shape. Quarter revenue was up 11.4 percent year-over-year, with operating profit up 5 percent. However, there are some interesting details.

Notice the big difference between the revenue and operating profit increases. Clearly there were some significant inefficiencies and expenses creeping in. HP did report non-GAAP numbers as well as GAAP, "related primarily to the amortization of purchased intangibles, restructuring charges and acquisitionâˆ'related charges." But given that HP does period acquisitions, including intangibles, as well as cost cutting, including the 9,000 job cuts it announced in early June, I'd tend to look at the company through the GAAP lenses. If managers want to use non-GAAP, it seems reasonable to consider them only when there is a once-in-a-blue-moon event. But the company laid off 24,600 after acquiring EDS, and it also instituted the unpopular mandatory pay cuts on all, though still managed to leave upper management effectively untouched. Hardly anything new about things today.

More intriguing from the view of analyzing the company is where revenue increased:

Enterprise Storage and Servers, up 19 percent
Personal Systems Group (PCs), up 12 percent
Services, up 1 percent
Software, up 2 percent
Imaging and Printing, up 9 percent
Financial Services, up 14 percent

This sounds like HP floated on the need of companies to finally pay for system upgrades they had long put off because of the economy. But if the future is really, really cheap hardware, vendors need to find other ways to make money. Having software and services, two obvious categories, be essentially flat is bad news.

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Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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