HP Raises Outlook for Year on Accelerating Market, Product Strength

By Jessica Davis  |  Print this article Print

Hewlett-Packard CEO Mark Hurd credits the raised outlook for HP's fiscal year to an accelerating market, better product mix and leaner cost structure. HP also announced a stronger first quarter with higher revenues and net income year over year. Product sales, including personal computers, printers, wireless printers and laptops, climbed while services sales declined by 1 percent for the quarter.

Hewlett-Packard (NYSE:HPQ) reported first-quarter net revenue of $31.5 billion, up 8 percent year over year, and net income of $2.3 billion, up from $1.9 billion during the same period a year ago, representing a roughly 25 percent increase.

More significantly, HP raised its outlook for its full fiscal year, citing its technology portfolio, leaner cost structure and accelerating momentum in the market..

HP is expecting revenue for the full year to be $121.5 billion to $122.5 billion, up from its previous estimate of $118.0 billion to $119.0 billion. HP expects fiscal-year earnings per share of $3.79 to $3.86, up from its previous estimate of $3.65 to $3.75.

HP executives told analysts during a conference call following the earnings announcement that there had been double-digit increases year over year in printer sales, x86 servers and PCs. HP's Personal Systems Group (PSG) grew more than 20 percent year over year, driven by notebooks and TouchSmart PCs and a 20 percent increase in the U.S. PC market, HP said. HP estimates a 4 percent gain in market share in the commercial and consumer market.

HP said consumer and commercial printer shipments grew by 18 percent and 11 percent respectively during the quarter. Wireless printer sales doubled while ink in office products tripled and supplies revenue grew 4 percent over the same period a year ago, CEO Mark Hurd told analysts during the conference call.

"We worked real hard on IPG [HP's printing unit] in 2009, and in a strange way I think 2009 was a blessing for us," Hurd told analysts. "It really got us operationally focused and, obviously, as you can see by the unit growth, probably our best unit growth number in a long time."

Hurd noted that the company probably could have sold more laser printers and ink units in the quarter, but did its best to handle the demand that was there. Wireless printer demand was also high.

"We've had tremendous demand in the wireless segment," he said. "The wireless segment roughly doubled."

Hurd told analysts that HP expects supplies growth to continue in low to middle single digits during the fiscal year.

As for the services business, Hurd said it saw a decline of 1 percent from the same period a year ago while services operating profits grew 21 percent over the same period a year ago. The software business remained flat but saw a 3 percent margin increase. Financing grew 13 percent and delivered double-digit return on equity, Hurd said.

Looking ahead to the second quarter, HP expects revenue of $29.4 billion to $29.7 billion and diluted earnings per share in the range of 89 cents to 91 cents.

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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