HP just reported their Q1 results and the numbers aren’t pretty.   The press release is dressed up to make the quarter look decent.  “1% revenue growth”, “non-GAAP operating profit up 10%”, etc.  But let’s look at the real numbers:

Net revenue was essentially flat.  But the expected revenues for Q1 were  $31.93B – a colossal miss on the top line for a company of this size.    If we drop down their EPS was actually in-line with estimates (due to some financial engineering).  But a closer look reveals a 2% lower tax rate on a year over year basis and a 7.2% lower share count.   Back out the EDS acquisition (+$4.7B in revenues) on an apples to apples comparison and this quarter was substantially weaker than it appears.  While services (EDS) are fairly strong the rest of their businesses are declining.  The bottom line lies (and is manipulated by buybacks and other accounting shenanigans), the top line doesn’t.  The enormous revenue miss is all I need to know about this company in terms of what the market expects from them.  I can’t think of a single good reason to own HPQ over QQQQ at this time.  Their income statement is clearly in decline.   The added company risk is not worth it.

Update (7:45PM) : Upon futher inspection the revenues are actually much weaker than the numbers appear.  The EDS acquisition actually makes the quarter look relatively strong at first glance, but an apples to apples comparison shows that EDS added nearly $5B in revenues to the Service segment.  Meanwhile, HP’s other segments were all down substantially.  Notably PSG and IPG were down close to 19% each and accounted for over 50% of total revenues.