HP forecasts split-related costs below expectations

Thu May 21, 2015 9:22pm EDT
 
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By Abhirup Roy and Anya George Tharakan

(Reuters) - Hewlett-Packard Co (HPQ.N: Quote), which is in the process of splitting itself, forecast separation-related costs below the expectation of several analysts and reported a better-than-expected quarterly profit.

The world's No. 2 personal computer maker, whose shares rose more than 3 percent in extended trading on Thursday, kept its profit forecast unchanged for the full year, allaying fears of a strong dollar and weak enterprise demand for its services.

The 75-year-old company said it expects $400 million-$450 million of costs from the planned separation of its computer and printer businesses from its faster-growing corporate hardware and service operations.

On a conference call, the company said it sees potentially $2 billion in restructuring costs in its Enterprise Services group over three years.

The company added it may reduce costs at the two companies by about $1 billion during the same period.

"I thought it could be a little higher than that," FBN Securities analyst Shebly Seyrafi said. There was some excitement about the costs being less than expected, he said.

The forecast soothed investor concerns about costs for the breakup in the first year, Cross Research analyst Shannon Cross said.

Ongoing cost reductions and HP's focus on higher-margin sales were driving profit, Cross said. Total costs and expenses fell 5.7 percent to $24 billion in the second quarter ended April 30.   Continued...

 
The Hewlett-Packard (HP) logo is seen as part of a display at the Microsoft Ignite technology conference in Chicago, Illinois, May 4, 2015. REUTERS/Jim Young