(Adds CEO quote, analyst comment)
By Philipp Gollner
SAN FRANCISCO Nov 19 Hewlett-Packard Co
(HPQ.N), the world's largest personal computer maker, issued a
better-than-expected quarterly profit and outlook on Monday,
driven by strong sales of notebook computers.
HP also announced an $8 billion additional share buyback
program, but market reaction was muted by uncertainty over how
much the U.S. credit crisis will hurt technology demand in
coming months. HP shares rose 1.4 percent in extended trading
The results came after International Business Machines Corp
(IBM.N) and Cisco Systems Inc (CSCO.O) warned of weakness in
orders from U.S. financial institutions, which are mired in
Chief Executive Mark Hurd told reporters on a conference
call that HP saw a "fairly steady environment" in its fiscal
fourth quarter, which ended on Oct. 31, helped by lower
computer component prices.
"We do not have a huge exposure to the financial services
industry," Hurd said. "We saw no change in spending in
financial services in the quarter."
Net income in the quarter rose 28 percent to $2.16 billion,
or 81 cents per share, from $1.7 billion, or 60 cents per
share, a year earlier, HP said. Earnings before items was 86
cents per share, beating the average Wall Street forecast of 82
cents, according to Reuters Estimates.
Revenue grew 15 percent to $28.3 billion, compared with the
average analyst forecast of $27.4 billion. Sales were helped by
a 49 percent jump in notebook PC revenue.
"Great numbers, great quarter," said Brent Bracelin, an
analyst at Pacific Crest Securities. "This stock has been one
of the best performing stocks in the past two years."
When asked about the muted share reaction, Bracelin said:
"I can't explain the disconnect other than that people are very
worried about spending on IT."
Palo Alto, California-based HP last year overtook Dell Inc
DELL.O as the largest maker of personal computers after three
years of lagging behind its Round Rock, Texas-based rival. Hurd
has focused on selling laptops and printers in stores and in
markets outside the United States, areas where Dell lagged.
HP, which has a market value of about $130 billion, said
revenue in its personal systems group, which includes PCs for
businesses and consumers, rose 30 percent to $10.1 billion in
It had benefited from lower prices for computer memory
chips and other components, although HP said such costs may be
moderately less favorable in the current quarter.
"The pricing environment is expected to be generally
favorable, although maybe a little bit less than in Q4," Hurd
told analysts. "There's tightness in some categories, but in
other categories, there's pretty ample supply."
HP forecast fiscal first-quarter earnings per share before
items of 80 cents, beating the average Wall Street forecast of
77 cents, according to Reuters Estimates. HP saw first quarter
revenue ranging from $27.4 billion to $27.5 billion, versus the
average expectation of $27.04 billion.
For the full 2008 fiscal year, HP forecast earnings per
share of $3.32 to $3.37 before items and revenue of about
$111.5 billion. Analysts, on average, expect full-year earnings
of $3.26 per share and revenue of $109.8 billion.
HP has cut costs and expanded high-profit businesses such
as software and technology services. Software revenue doubled
to $698 million after HP bought Mercury Interactive Corp a year
ago for about $4.9 billion.
"It looks like the cost cutting has helped. Software is
growing. It once again points to the CEO who has been there two
years continues to turn things in the right direction," said
Richard Sichel, chief investment officer of Philadelphia Trust
Co. "I think they will continue to surprise on the upside."
HP's imaging and printing group, which includes printers
and printer supplies, saw revenue growth of 4 percent to $7.6
billion. Revenue from server computers and data storage systems
rose 10 percent, helped by strong sales of so-called blade
servers designed to save space and energy in data centers.
HP shares have risen about 21 percent so far this year to
trade at about 18 times estimated fiscal 2007 earnings,
compared with Dell's multiple of 19 and IBM's 15.
(Additional reporting by Scott Hillis and Daisuke Wakabayashi,
editing by Braden Reddall and Andre Grenon)