Beyond the PR Nightmare: Earnings

By Reuters  |  Print this article Print

In spite of the drama swirling around technology giant HP over its ousting of CEO Mark Hurd and hiring of ex-SAP CEO Leo Apotheker, the company is expected to report a strong quarter. Meanwhile, rival Dell's quarter is more in question as industry watchers caution on Dell's reliance on government spending at a time when such spending appears to be slowing.

Public relations aside, HP will provide a snapshot of global IT demand when it reports results next Monday. The world's largest tech company by revenue has hinted at a solid upcoming year and has stressed its investments after years of cost-cutting under Hurd.

For the fiscal fourth quarter ended Oct. 31, Wall Street expects HP to report earnings of $1.27 a share on revenue of $32.8 billion. HP has beaten or matched analysts' earnings estimates every quarter over the past two years.

Its shares are still down about 10 percent since Hurd was forced out on Aug. 6 and -- according to Thomson Reuters StarMine -- may be undervalued. Employing a StarMine quantitative model, HP shares have an intrinsic value of $75.33 -- above their closing price of $41.80 on Tuesday.

IT services and printing are HP's bread and butter, providing nearly half of revenue and two-thirds of operating profit. But strength in the quarter could come from servers and storage, as well as in networking, where there is evidence that the company is beginning to take market share from Cisco.

Although HP lost two percentage points of personal computer market share in the July-September period according to IDC, its operating margin should benefit from improved component costs.