H-P may have waited too long to spin off consumer units

SAN FRANCISCO — Hewlett-Packard CEO Meg Whitman and the company's board waited a long time to decide to separate H-P's consumer units, including its PC business, from its corporate businesses.

The company's most recent financial results, released late Tuesday, suggest they may have waited too long.

The long-stumbling tech giant reported that revenue either fell or stagnated from a year ago in every one of its lines of business, with overall sales dropping 5% in the fiscal first quarter.

Revenue was flat at H-P's PC unit, where falling prices offset a 9% rise in unit shipments.

In printing, sales were down 5%.

That means neither major product line in the stand-alone consumer company that H-P wants to sell to investors is growing.

Worse still, company executives said on a conference call late Tuesday that the printing unit's recent operating margins of just over 19% aren't sustainable.

And sales in the company's corporate markets are also dropping.

Enterprise services were down 11% year-over-year, while financial services fell 8% and software revenue dropped 8%.

The company's operating cash flow plunged 75% for the fiscal first quarter versus a year ago.

And there's no immediate relief in sight for H-P investors, as the company issued a forecast for the current quarter that was short of Wall Street expectations.

Before the forecast, analysts were expecting the company's sales to fall 2% in the fiscal year ending in October.

Now, though, look for expectations for revenue, profit and operating cash flow to be trimmed.

With its results and forecast both disappointing investors, H-P shares (TICKER: HPQ) fell 6% in late trading Tuesday.

Given all this bad news, prospective buyers of shares in H-P's future consumer spin-off will likely look at that business with more skepticism.

John Shinal has covered tech and financial markets for more than 15 years at Bloomberg, BusinessWeek,The San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.