HP sales grow 13 percent
SAN FRANCISCO |
SAN FRANCISCO (Reuters) - Hewlett-Packard Co. (HPQ.N) reported underlying quarterly profit growth of 27 percent on Wednesday, lifted by broad cost cutting and strength in its personal computer and printer businesses.
Revenue for HP's fiscal second quarter increased by 13 percent to $25.5 billion, and shares of the world's biggest maker of PCs and printers rose slightly in extended trade.
Chief Executive Mark Hurd, who has led a turnaround at the company since his arrival just over two years ago, said the revenue growth was its strongest since 2000 and HP continued to gain share in a number of markets.
"PCs and servers, as expected, were leading the charge," said Brent Bracelin, an analyst at Pacific Crest Securities.
Net income was $1.78 billion, or 65 cents per share, compared with the year-ago quarter's $1.90 billion, or 66 cents per share, including a tax settlement gain of 15 cents. Excluding items, HP had a per-share profit of 70 cents in the just-reported quarter.
"It was highlighted by the fact we had strong revenue growth across the company," Hurd said in an interview.
The company last week lifted a prior second-quarter profit forecast, following the inadvertent disclosure of financial data via e-mail to a single outside party. HP said on May 8 it expected to report net earnings per share of 64 cents to 65 cents, and a profit before items of 69 cents to 70 cents.
HP also said it still expects third-quarter revenue of $23.7 billion to $23.9 billion, and narrowed its forecast range for third-quarter earnings per share to 64 cents to 65 cents from a prior 63 cents to 65 cents. HP added that third-quarter results would top the Wall Street estimates at the time.
HP has recently gained an edge on longtime rival Dell Inc. (DELL.O), which lost share to HP in the fourth quarter and in January. HP's chief rival, IBM (IBM.N), last month reported an 8 percent rise in quarterly profit, helped by higher sales of software and computer services.
As he often does, Hurd said that while the company has cut costs considerably, there is still more work to be done.
"We will take out more overhead costs in 2007, '8 and '9 than we did in 2005 and 2006," Hurd told reporters on a conference call. "We're doing better but we can do better than we're doing today."
HP announced major job cuts and a restructuring in 2005, not long after Hurd took the helm. "There was a perception that it was a one-time thing," he said in the interview. "We're looking at this on a more dynamic basis."
Revenue in HP's personal systems group, which includes PCs, rose 24 percent to $8.7 billion and operating profit was $417 million, or 4.8 percent of revenue, versus 3.6 percent a year ago.
In imaging and printing -- where HP earns a good deal of its profit -- revenue rose 6 percent to $7.2 billion. Operating profit was $1.2 billion, or 16.3 percent of revenue, up from 15.5 percent a year ago. HP has long said its goal is operating margins for the group of about 15 percent.
Enterprise storage and server revenue climbed 8 percent to $4.6 billion and operating profit was $407 million, or 8.8 percent of revenue, up from 7.5 percent a year earlier.
HP's services business saw revenue climb 7 percent to $4.1 billion and operating profit was $459 million, or 11.1 percent of revenue, up from 8.9 percent a year ago.
HP's software business grew 58 percent to $523 million, led by strong growth from Mercury Interactive, which HP purchased last November. Operating profit was $42 million, or 8 percent of revenue, up from 0.9 percent of revenue a year ago.
HP shares rose 46 cents to close at $45.21. In extended trade after the results, they ticked higher to $45.49.
They trade at 14.7 times forecast earnings per share for HP's year to October 2008, compared with 17.2 times Dell's forecast earnings for its fiscal year to January 2009, and IBM trades at 13.8 times its forecast calendar 2008 earnings.
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