PC and printer maker Hewlett-Packard (NYSE:HPQ) reported fiscal first quarter net income of $1.47 billion or 73 cents a share, down 44% from the year earlier earnings per share (EPS) of $1.17 a share. Absent one time charges, EPS was 92 cents in the fiscal first quarter ended Jan. 31, 2012. Sales were $30 billion, off by 7% year over year. Analysts' estimates were looking for EPS of 87 cents on revenues of $31 billion, respectively.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

A Work in Progress
The biggest anchor for HP during the quarter was the significant decline in computer hardware. The company's Personal Systems Group saw revenue decline 15% year over year. Looking deeper, the consumer segment was hit the hardest. Consumer client revenue dropped 25% compared with 7% on the commercial client side. Overall, total computer unit sales declined by 18% with similar declines for both desktop units and notebook units. It's not surprising to see such a decline in computer sales. Computing has become much more mobile thanks primarily to the smashing success of Apple's (Nasdaq:AAPL) iPad. In addition to the growing popularity of tablet computers, smartphones are like many computers today. Thanks to the iPhone and the big push by Google's (Nasdaq:GOOG) Android software, smartphones are becoming the new notebook computers for many. (For related reading, see Apple Stock: $500 And Climbing?)

Better Days Ahead
PC sales will face headwinds going forward. Even Dell (Nasdaq:DELL) has acknowledged it, and it continues to focus on the IT side of the business to fuel future growth. While system sales are still going to be important for HP, this is the company's first full quarter under new CEO Meg Whitman. So, it's certainly too early to judge HP's future at this juncture. But like Dell, HP is experiencing growth on the software and service side of the business. Software revenue grew 30% year over year. Today's data heavy computing needs will create a greater demand for IT support. HP's strong position in the market puts it a great spot to leverage continued software and service revenue.

The Bottom Line
The company maintained its full year outlook of EPS of $4. Given the rapidly changing nature of the tech industry, that figure will likely change over the year. At the present moment, HP shares trade for $26 or a 9 P/E multiple. Yet, with a new CEO at the helm and some bad corporate decisions behind it, HP should be set for better days ahead.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  2. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  3. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  4. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  5. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  6. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  7. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  8. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  9. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  10. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!