HP Fourth Quarter Shows Higher Profit on Revenue Drop

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.