INSTANT VIEW: HP preliminary profit beats Wall St. view

NEW YORK (Reuters) - Hewlett-Packard Co (HPQ.N) said on Tuesday it expects its fiscal fourth-quarter earnings to beat Wall Street forecasts and also predicted a profit for the coming year that topped analysts' estimates.

Shares in the world's largest maker of personal computers surged more than 11 percent as the preliminary earnings helped reassure investors the company may be better positioned than some rivals in an economic slump.

COMMENTARY:

SHEBLY SEYRAFI, ANALYST, CALYON SECURITIES

"It looks like results were better than what people had feared and the guidance was better than people had feared. However, I think the risk is that their forward guidance is too optimistic as PC growth slows down, especially in notebooks. PC visibility is getting worse by the day and what they are seeing right now may not be true in a couple of months.

"So although what they are guiding for fiscal 2009 is positive relative to consensus, it still may be too high once the final numbers come in.

"Short-term forecasts are always subject to a lot of risk and variability, but my sense is the stock goes up today, and over the coming months may exhibit more weakness as it becomes clearer that things are getting weaker."

ASHOK KUMAR, ANALYST, COLLINS STEWART

"Near term there continues to be headwinds in terms of overall PC demand, but where HP and IBM (IBM.N) are more immune is higher exposure to services and solutions as well as a global footprint, which provides them offset to weakening hardware sales.

"The threat of a consumer pullback is real and present. It's unlikely that companies large and small can sidestep the structural weakness on the consumer side. But those with a broader portfolio -- like Hewlett-Packard and IBM -- will be able to weather the storm better than the likes of Dell (DELL.O).

"This week Dell reports and it looks like their numbers should be below Street expectations both for the quarter and the fiscal year since it's a pure hardware company."

BRENT BRACELIN, ANALYST, PACIFIC CREST

"While (their guidance) does imply they are going to grow the 8 to 10 percent year over year, that includes revenues from EDS.

"So if you were to back out the EDS revenue they are guiding to an organic decline of about 5 to 7 percent year to year. So they are expecting their business to decline, which is a reasonable expectation, but clearly it's not as bad as the PC supply chain."

SHANNON CROSS, ANALYST, CROSS RESEARCH

"The HP numbers reflect the fact that HP is gaining market share in an extremely strong competitive position. They've got share gains, combined with very aggressive cost reduction. It's very prudent management of their resources, and that's allowed them to put out numbers that are ahead of the Street even in this economic environment.

"If you look at where their guidance is, it definitely reflects a slowdown in demand. But in this case you've got a strong company outperforming others. On a relative basis, they are doing better.

"The other important thing to note is that they are providing fiscal first-quarter 2009 guidance. We are far enough into November for them to know where retail demand is going to be. We still don't know consumer demand, but at least we know what the retailers are ordering. That's a positive because obviously with the Best Buy (BBY.N) warning the other day there were a lot of questions about whether retailers were going to be willing to hold any inventory and obviously they are."

CRAIG PECKHAM, EQUITY TRADING STRATEGIST AT JEFFERIES & COMPANY

"The relatively favorable outlook from HP took a lot of people by surprise particularly because we've seen a downbeat from other tech companies. The service business at HP is something other people don't have, which is a relatively new addition to HP's overall suite. That might mitigate some of the other demand softness in the PC market."

"I wouldn't expect it to hold the entire market higher. The overarching concerns here remain largely intact -- investors are struggling to determine how deep and how long this economic slowdown will be. HP's strength is the exception, not the rule."

(Reporting by Paul Thomasch, Franklin Paul and Deepa Seetharaman)