HP Reports Earnings Hike

By Reuters  |  Print this article Print

The PC vendor's stock rose 5 percent after it reported profit up 38 percent, which was ahead of Wall Street expectations.

By Philipp Gollner

SAN FRANCISCO (Reuters) - Hewlett-Packard Co on Tuesday issued a quarterly earnings report and forecast ahead of Wall Street targets as it cut costs and sold more PCs and server computers, sending its stock up 5 percent.

The report of a 38 percent profit rise showed HP was able to manage through a difficult economy due partly to strong sales in overseas markets, which account for more than two-thirds of total revenue.

"That's now 12 quarters of beats, basically since Mark Hurd came in" as chief executive, "so there's a lot of credibility to the company," said Richard Sichel, chief investment officer at Philadelphia Trust Co.

"The majority of revenues come from overseas, so this shows they can do well, and if things are slow in the U.S. for the next quarter or two, they are still growing overseas."

Notebook computers, server computers and software all showed revenue improvement. Analysts noted some weakness in the printer division, where consumer unit sales fell 2 percent, although overall revenue rose in the division.

Net income in HP's fiscal first quarter ended January 31 increased to $2.13 billion, or 80 cents per share, from $1.55 billion, or 55 cents per share, a year earlier. Revenue advanced 13 percent to $28.5 billion from $25.1 billion.

Excluding special items, profit was 86 cents a share, above an average analyst target of 81 cents. Analysts had expected revenue of $27.6 billion, according to Reuters Estimates.

"This positions the company well for 2008 and shows that they're able to execute even in a slowing economy." said analyst Shannon Cross of Cross Research.

HP "needed" to show strong earnings in a tough environment, Cross added. "They still had a slowdown from the printer side, but the other parts of the business made up for it."

HP was helped by cost cuts and strong sales abroad as U.S. technology spending slowed on recession concerns. But HP faces a tougher environment this year as consumers and companies reduce spending on technology hardware, the bulk of HP's business, and competition with a resurgent Dell Inc, the number-two PC maker, heats up.

"Our cost savings are significant and ongoing," Hurd told reporters on a conference call.

HP's overall operating margin, excluding special items, rose to 10 percent from 9 percent.

HP forecast second-quarter earnings per share before items of 83 to 84 cents, above the average Wall Street forecast of 82 cents. HP sees second-quarter revenue of $27.7 billion to $27.9 billion, above the average analyst forecast of $27.5 billion.

HP shares rose to $46.20 in extended trading after closing up 8 cents at $43.95 on the New York Stock Exchange.


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