FINALLY an article about HPQ WITH reasonable balance & sanity:
****************************************************
H-P unfazed after earnings question
Stock shows slight gain after analysts voice concern
PALO ALTO, Calif. (CBS.MW) -- Hewlett-Packard shares inched upward Wednesday as investors seemed to hold little against H-P following a report that suggested the company engaged in some fuzzy math to boost the profit picture in its personal-computing business.
At issue was a report in The Wall Street Journal in which some industry analysts voiced concern with how H-P (HPQ: news, chart, profile) listed some expenses in its recent 2003 first-quarter earnings report. The Journal stated that in its report, H-P reclassified the estimates of expenses of items such as research and development and corporate-governance costs, resulting in a profit of $33 million for its personal systems group, the division responsible for PCs.
H-P ended up listing those expenses in a separate category for items that aren't normally covered by a specific business area. The Journal said the classification method was one used by Compaq Computer before it was bought by H-P for $19 billion last year.
Taking on Compaq's PC business was one of the biggest bones of contention surrounding H-P's merger efforts last year, and the company had highlighted the division's profit and turnaround from the $68 million loss the personal systems group recorded in its 2002 fourth-quarter.
When the expenses were added back in, H-P's PC division would have remained profitable, but the company would not disclose what the division's profits would have totaled.
Investors took a ho-hum approach to the Journal's report. By the time the market closed, H-P shares had risen 2 cents to close at $15.56.
The Journal said that H-P's moves wouldn't result in any changes to the company's bottom line. The company ended up posting a net profit of $721 million, or 24 cents a share, while revenue came in at $17.9 billion, missing analysts' estimates by more than $500 million.
Some industry analysts chided H-P for reclassification of the expenses, saying that the company would likely face stronger criticism in the future.
However, others said the expense-recording debate was little more than making a mountain out of a molehill. Richard Chu of S.G. Cowen called it a "nonissue."
"It's a classification change," Chu said. "What they did was redress a problem in the way they allocated and didn't allocate expenses before. I feel that it's a change for the better because now they compare apples to apples when it comes to expenses." |
