HP's 3Q Profit Is Off 89%HP's 3Q Profit Is Off 89%

Hewlett-Packard's third-quarter profit was $111 million--89% lower than the same quarter last year. Revenue for the quarter ended July 31 was $10.1 billion, 14% lower than it reported in the third quarter of 2000.

HP reported a $131 million tax loss from the sale of VeriFone during the period. It also revealed 6,000 layoffs, which it expects will result in a one-time charge of as much as $300 million. The cuts are expected to save $500 million annually. "We clearly have a long way to go," CEO Carly Fiorina told reporters, "but we're willing to do whatever it takes" to regain momentum.

On the plus side, it appears the vendor may finally be capitalizing on its temporary lead in Unix servers. HP has claimed revenue from 60% of the high-end Superdomes that have shipped under new revenue-recognition policies that prohibit the company from collecting on sales until each system is running. But even with the Superdome sales, overall business sales were down 11% year over year. And HP's consumer business was down 22%.

Industry analyst Thomas Kraemer at Merrill Lynch says the quarter demonstrated problems in HP's services business: "They wrote off a lot of bad debt, and service margins should be tough for four more quarters."