- Associated Press - Wednesday, February 22, 2012

PALO ALTO, CALIF. (AP) - Net income at Hewlett-Packard Co. fell in its first full quarter under CEO Meg Whitman, as the company confronted weak consumer sales and supply shortages due to flooding in Thailand.

Whitman described a company in transition Thursday, but she identified goals, which include improving internal procedures and reducing costs to free up money for investments in growing areas. She said HP sees opportunities in security services, information management and Internet-based systems known as cloud computing.

HP’s sales to consumers fared the worst in the latest period, dipping 23 percent worldwide from a year earlier. HP is the world’s largest maker of PCs, but it’s been performing poorly as buyers in the developed world turn their attention to Apple’s iPads and Macs. Meanwhile, the company has been unable to properly capitalize on the growing appetite for PCs in emerging markets.

Whitman said HP also had to battle cautious spending by some business customers in the U.S. Worldwide, revenue in the company’s commercial businesses fell 4 percent.

The company said it remained guarded about prospects in Europe, although some of the markets elsewhere in the world appear to be stabilizing.

Net income was $1.47 billion, or 73 cents per share, in the three months that ended Jan. 31. A year earlier, it was $2.6 billion, or $1.17 a share. Adjusted for one-time items, the company earned 92 cents per share, above the 87 cents expected by analysts surveyed by FactSet.

Revenue was $30 billion, down from $32.3 billion and slightly below expectations of $30.7 billion.

The revenue drop was even steeper, 8 percent, when taking out the effect of changes in currency exchange rates. It was the fastest revenue decline for the company since the recession hit 2009 results.

HP blamed flooding in Thailand for more than half of its revenue drop. The floods last year disrupted manufacturing of storage drives, a key component in PCs. HP said it decided to divert resources to higher-margin products, but it didn’t do as well as it expected due to ongoing operational problems.

“We were not as effective as we needed to be in matching that supply with that demand,” Whitman said during a conference call with analysts.

Whitman said the company will focus first on stabilizing its finances and improving its operations. She said the company needs to do better, for instance, at turning orders into products faster than its rivals.

And while she described HP as “world class” in buying components, “I’m not sure I’d say we were world class in terms of how we think end to end about supply chain. Our systems and processes: we underinvested in those over the last few years,” she said.

CEO Whitman replaced Leo Apotheker in September after a short and stormy reign. Apotheker announced that HP was looking to jettison its PC unit, which has large volume but small profits. That scared off some buyers, who may not have come back when Whitman decided to keep the division.

Whitman urged patience from investors, describing her turnaround plan as a “multiyear journey.”

“I feel very good that we know the challenges,” she said. “We know what we’re going to do about them, and we’re headed in the right direction.”

For the current quarter, the Palo Alto, Calif., company said it expects earnings of 88 cents to 91 cents per share. Analysts were expecting 95 cents per share.

HP shares fell 38 cents, or 1.3 percent, to $28.56 in extended trading, after the release of the results.

Results were buoyed by HP’s business of providing information technology services to corporations. The company’s second-largest division, after PCs, saw a revenue increase of 1 percent from a year ago.

Sales from the printing division, HP’s third-largest, were down 7 percent, and its profitability continued to sag. Sales of printers fell faster than ink and toner sales.

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