HP Fourth Quarter Shows Higher Profit on Revenue Drop

By Jessica Davis  |  Print this article Print

HP executives said they saw improvements in printing and PC sales as consumers started to make the switch to Windows 7. And while revenue declined year over year for the quarter, sequentially revenue was up.

HP (NYSE: HPQ) pointed to improvements in its printing and PC sales as consumers made the switch to Windows 7, saying that it gained PC market share and its fourth-quarter earnings were in line with previous forecasts.

Executives from the technology giant made those observations in a call to analysts following the release of HP’s fourth-quarter and year-end earnings report this week.

HP reported fiscal fourth-quarter net revenue of $30.8 billion, down 8 percent from the same period a year ago and up 12 percent sequentially.  Net earnings totaled $2.4 billion, compared with $2.1 billion for the same period a year ago.

For the fiscal year, net revenue was $114.6 billion, down 3 percent. Net earnings for the year came in at $7.7 billion, versus $8.3 billion for the same period a year ago.

The company forecasts revenue of approximately $29.6 billion to $29.9 billion in its fiscal first quarter. For the full year next year HP is forecasting revenue of $118 billion to $119 billion, representing an increase from its previous estimate of $117 billion to $118 billion. Those estimates do not include the announced acquisition of 3Com.

HP CEO Mark Hurd told analysts during the call that HP has made "significant progress in structurally reducing our cost structure in services, IPG, supply chain, warranty, real estate and IT.

"At the same time we plan to increase investments in the business, in areas such as sales coverage," he added.

Hurd said that HP also has been improving its technology portfolio, and the 3Com acquisition will take the company’s "networking and security game to the next level."

As for its printing division, IPG, which continued to experience declines, Hurd told analysts that the company has improved that organization’s operations.

"In many ways, the tough market has been a blessing for IPG," he said. "I think the business is now run with stronger operational rigor than we have ever had before."

But CFO Catherine Lesjak told analysts that it is not time yet to say a recovery has arrived. Talking about the forecast for HP’s first quarter, she said the guidance points to a 3 percent to 4 percent decline.

"We should be prudent about calling a recovery in [Europe, Middle East and Africa] when we have yet to really see that through Q4," she said.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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