U.S. Consumer Weaker

By Reuters  |  Posted 2008-02-20 Email 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.

"Consumer in the U.S. is not quite as robust as what we have seen in the past," although consumer-segment sales grew strongly abroad, Hurd said on the conference call.

The prices of some computer components, such as memory and monitors, will be "less favorable" in the current quarter than in the first period, Chief Financial Officer Cathie Lesjak told analysts.

Hurd has cut about 15,000 jobs since becoming CEO in 2005 and consolidated data centers and real estate to reduce costs. HP has spent some of the savings on software-company acquisitions to compete with IBM and other rivals.

HP has had fast growth in emerging markets such as India, Brazil and Russia, while expanding in software. It says the strategy will help it weather a tough economic climate this year.

"We've got a broad footprint," Hurd said. "There's some exciting growth in those emerging markets and we want to compete for it."

Revenue from Brazil, Russia, India and China jumped 35 percent in the first quarter, more than twice as fast as in the Americas.

First-quarter revenue in HP's personal systems group, which includes PCs for consumers and businesses, rose 24 percent to $10.8 billion and had an operating profit margin of 5.8 percent, up from 4.7 percent a year earlier. Notebook computer revenue jumped 37 percent, and desktops rose 15 percent.

Revenue in the enterprise storage and servers unit, which supplies servers and storage gear to businesses, rose 9 percent to $4.8 billion, helped by an 81 percent revenue surge from "blade" servers that use relatively less energy and space.

The imaging and printing group, which includes printers and printer supplies, had revenue growth of 4 percent, to $7.3 billion, and an operating margin of 15.7 percent, up from the year-earlier period's 15.3 percent.

Software posted revenue growth of 11 percent to $666 million after HP bought Mercury Interactive Corp in 2006 for $4.9 billion. It bought Opsware Inc for about $1.6 billion in September, bringing to about $7 billion the total for HP software-company acquisitions in recent years.

The company has said it is interested in buying companies that sell data management software and business intelligence programs for corporate customers.

HP shares, down 13 percent this year, trade at 13 times expected 2008 earnings per share, a discount to the average of companies on the Standard & Poor's 500 index and about the same as competitor International Business Machines Corp.

(Additional reporting by Scott Hillis and Duncan Martell; Editing by Braden Reddall)

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