Q2 profits slacken off at Hewlett Packard

Hewlett Packard's second quarter profits failed to live up to expectations, although the US giant saw revenues soar and interim orders grew 19 per cent in the UK.

Earnings rose 25 per cent to $723 million for the period ended April 30 1996. Revenues for Q2 were up to $9.9 billion, compared with $7.4 billion for the same period last year.

Chairman and CEO Lew Platt said: 'Our results were excellent in many respects, but we didn't quite match last quarter's high level of profitability.'

This comment reflects the way in which HP's PC division has maintained healthy levels of growth, while the company's workstation and component business has failed to keep pace. Positive growth in the PC sector may be good news for HP, but with margins becoming tighter it will become more difficult to increase earnings.

'We need to focus on those areas where growth has been sluggish,' said Platt.

George O'Connor, senior analyst at IDC, said: 'HP has done well with PCs; it has good terms of trade and can tick all the product boxes it wants to. In a low-margin business a company needs to adjust its business model and HP has a tightly managed balance-sheet. In recent years they have gained ground when IBM and Digital lost ground.'

Commenting on the state of the UK market, HP UK finance director Paul Valler said: 'Manufacturing orders fell sharply across the UK last quarter and business certainly doesn't get any easier.'