In these overstretched markets, with the likelihood of a substantial correction if not a crash becoming stronger every day, it’s not good enough simply to come out with superb figures quarter after quarter – your figures have to be pluperfect and exceed all expectations every quarter. So it was that shares of Hewlett-Packard Co tumbled $8 to $104.75 in opening trading on the New York Stock Exchange yesterday as traders latched on to the fact that the cost of goods sold rose to 65.8% of turnover in the February to April quarter, from 64.5% in the fiscal first quarter and 62.7% in the year ago quarter. The company blamed delays in workstation products and its product mix for the rise. And its earnings per share of $1.37, up from just $1.10 a year ago, was shy of Wall Street expectations, where the best guesstimate was $1.45. Hewlett also said order growth in the second quarter was not as well-balanced as it has been. Reasons for the slightly adverse trend included the workstation delays, also a delay in disk mechanisms, a greater proportion of low-margin personal computers and printers in its revenue mix, and competitive pricing pressures. Operating expenses increased 23% over the year-ago quarter and were 23.7% of net revenue, but that compares with 25.6% of net revenue in the same quarter last year but 22.6% in the first quarter of fiscal 1996. We improved our operating-expense ratio compared with last year, but we didn’t do as well as we had hoped, declared chairman Lewis Platt. Inventory was 18.7% of net revenue, compared with 16.6% in last year’s second quarter, 20.3% last quarter.
Multimedia
Inventory declined slightly during the quarter, said Platt. But inventory still is higher than we want it to be in some areas, he added. The company nevertheless believes its growth rates in many parts of its business are outpacing overall market growth – and that is certainly the impression from the outside – despite the intense competition. Within the computer business, it said personal computers grew very rapidly in the second quarter and continued to gain market share – latest market figures show it knocking on the door for the number three spot in the US and Europe – having come from nowhere a couple of years ago when it ranked little better than the NCR Corps and Unisys Corps. And orders for commodity servers posted an outstanding increase over the year-ago quarter. One reason for the sharp growth is that orders for the Pavilion multimedia home computers were extremely strong: it was not even in that business a year ago.
