Hewlett-Packard (HPQ) is expected to report Q2 earnings after the market close on Wednesday, May 23, with a conference call scheduled for 4:30 pm ET.
The consensus estimate is 91c for EPS and $29.92B for revenue, according to First Call. For the most part, analysts are expecting HP's results to be in-line with expectations, possibly a little light on sales. The curve ball is Europe. Hewlett-Packard could conceivably see its results hurt more by Europe than Dell (DELL) was, as Europe accounts for 37% of HP's revenue -- making it the most heavily exposed there among the large IT vendors. But the big item on the agenda will be HP's plans for restructuring and how many jobs may be lost. As AllThingsD reported last week, HP is contemplating a restructuring that could see as many as 30,000 jobs eliminated, including 5,000 through voluntary retirements. HP has declined to comment, but CEO Meg Whitman has made it clear that she believes the company needs to trim its expenses to offset declining revenue and free up more money to pour into research and development. The looming layoffs could be the largest in HP's 73-year history.
Deutsche Bank expects HP to deliver modest revenue upside and in-line EPS due to low expectations, relative PC strength and margin softness. DB is estimating EPS of 94c and revenues of $30.1B, slightly higher than consensus. The WSJ reported that headcount reductions of 25K-30K, vs. 50K over 5 years under the prior CEO, could likely result in a massive $2.5B-$3B charge, with a significant portion being cash. Deutsche believes the restructuring actions are necessary to achieve HP's $4.00 non-GAAP EPS target in FY12 and will be aimed at Services and the recently combined PC/Printing operations. The firm believes HP's ongoing restructuring actions are required to support existing margins as past under-investment has left it poorly positioned for growth and HP is seeing ongoing erosion in Printing, Itanium and Services. Guidance: Deutsche expects restructuring actions will allow HP to maintain FY12 non-GAAP EPS guidance of $4.00+, but it continues to expect the company will face growing headwinds through the summer relating to soft Consumer PC demand trends/ lack of a tablet strategy, re-investment/ margin pressure in Services performance and weak printing.