HP results top Street despite stronger dollar

SAN FRANCISCO (Reuters) - Hewlett-Packard Co results beat Wall Street targets as net profit rose 14 percent, subduing fears that slowing economies and a stronger dollar would weaken the world's biggest computer and printer maker and its rivals.

Shares rose 2.8 percent in after-hours trading on Tuesday after HP posted solid fiscal third-quarter international sales and forecast fourth-quarter earnings ahead of expectations.

Signs that weakness in the U.S. economy is spreading have unnerved investors and Wall Street over the possibility that technology customers would cut budgets and trim tech companies' profits in the process.

"The latest round of results means big-cap information technology companies are going to make it through the rest of the year," said Cowen & Co analyst Louis Miscioscia.

Results in the profitable printer division were not as rosy, but analysts were generally positive on the quarterly report.

HP reported net income for the quarter ending July 31 of $2.03 billion, or 80 cents a share. Excluding items, HP reported profit of 86 cents a share, ahead of the average analyst expectation of 84 cents a share.

Revenue rose 10.5 percent to $28.0 billion, or roughly 2 percent ahead of Wall Street's average expectations. Without the benefit of international currency translation, revenue grew only half that rate at 4.7 percent.

The Palo Alto, California-based company forecast fiscal fourth-quarter profit, excluding items, of $1.01 to $1.03 a share, ahead of the average analyst view of $1. The company forecast revenue of $30.2 billion to $30.3 billion, slightly behind the average forecast of $30.4 billion.

"They're going to obviously see some impact from the rising dollar. This is going to influence their overseas revenue and will have some impact on their bottom line," said William Rutherford, president of Rutherford Investment Management in Portland, Oregon.

Revenue from outside the United States accounted for 68 percent of the total. Adjusted for currency exchange rates, Europe, Middle East and Africa revenue rose 5 percent, and Asia Pacific revenue rose 8 percent. Revenue in the Americas rose 3 percent.

"This pushes out the wall of worry for tech investors until another 90 days," Miscioscia said of HP's results and recent reports from other major major information technology provides such as IBM and Cisco Systems Inc. Next week, Dell is the last major computer maker to report this quarter but results are expected to be solid.

HP and other PC makers have been depending on strong overseas growth as U.S. performance has lagged because of wider economic troubles.

European technology spending has been "more of a mixed bag," Hurd said, but he added that the company has seen some surprising growth in some markets in the region.

Revenue in the personal systems group rose 15 percent to $10.3 billion. Notebook revenue grew 26 percent from last year, while desktop revenue rose 6 percent.

Imaging and printing revenue grew 3 percent. Enterprise storage and servers revenue rose 5 percent. Services revenue rose 14 percent.

HP's diversified computer and printer business provides a broad snapshot of the spending habits of customers of all sizes. Roughly a third of revenue comes from selling hardware, software and services to big business. The second one-third is from small and medium business and the final third from consumer sales, both mostly for hardware.

In two of HP's three businesses -- big enterprise and small and medium business -- "It looks like results are going to be close to normal for these two groups," Miscioscia said. The unknown is how consumer spending on technology will hold up.

"It is not to say nobody is concerned about these things. There is tremendous concern," Miscioscia said. "But so far spending is holding up pretty well."

Shares rose to $44.89 in after-hours trade after closing at $43.69 on the New York Stock Exchange.

(Additional reporting by Jim Finkle in Boston, Syantani Chatterjee in Los Angeles and Kristina Cooke and Steven C. Johnson in New York, editing by Richard Chang, Gary Hill)