When itlast month, HP touted that its PC business had returned to profitability after years of losses. However, in conjunction with its most recent earnings release last month, HP made an accounting change that shifts certain research and development costs out of each of its business segments--a move that made each of the business segments appear more profitable. Some analysts had turned a profit at all, prompting HP to say that even without the accounting move its PC unit would have been profitable, though the company declined to say how large that profit would have been.
However, by HP's new method of accounting, the company already had a profitable PC business a year ago, prior to its merger with Compaq Computer. For the three months ended Jan. 31, HP said its PC business turned a $33 million operating profit. Under the same accounting method, HP (excluding Compaq) had a profit a year ago of $26 million, according to figures the company included Wednesday in its quarterly filing with the Securities and Exchange Commission.
Furthermore, HP's high-end computing business actually had a narrower operating loss as a standalone company a year ago than did the merged company in the most recent quarter. For the three months ended Jan. 31, HP had an operating loss of $83 million, more than the $80 million loss that the pre-merger HP high-end computing business had a year ago, again using the company's new method of accounting.
HP points out that, including Compaq, the PC business would have lost $53 million a year ago. However, combining the two companies' enterprise computing businesses, HP would have had an operating loss of $60 million, far less than the $83 million loss for the most recent quarter.
Company spokeswoman Rebeca Robboy noted that the economy has worsened in the past year and said HP could not have posted the profits it did in the most recent quarter were it not for the merger.
"The portfolio of technology and the cost structures that underlie our PC and enterprise businesses are far superior now than they were a year ago for either standalone company and enabled us to make sequential improvements in profitability in the past three quarters despite a worsening economic environment," Robboy said.
One Wall Street analyst who requested anonymity said that HP is trying to make its results look better than they are.
"There are two ways to win a race. One is to run it out with all your energy, and the other way is just to move the finish line closer to where you are standing," the analyst said.