Hewlett-Packard raises outlook

SAN FRANCISCO (Reuters) - Hewlett-Packard Co's HPQ.N quarterly results beat expectations and it raised its full-year earnings outlook on demand for personal computers and servers as well as a resurgence in its printing business.

A logo of HP is seen outside Hewlett-Packard Belgian headquarters, January 12, 2010. REUTERS/Thierry Roge

Shares in the company jumped nearly 3 percent after-hours.

Analysts say the world’s largest technology company by sales is poised to ride an expected surge in corporate spending in 2010 as businesses replace aged equipment.

HP reported on Tuesday an 8 percent jump in fiscal second-quarter revenue from its printing division, double the growth in the first quarter. The division accounts for about one-fifth of HP’s revenue but a third of operating profit.

Higher-margin revenue from printing supplies climbed 6 percent from 1 percent previously.

The company is now forecasting a profit, excluding items, of $4.45 to $4.50 a share in fiscal 2010, up from a previous target of $4.37 to $4.44. That was in line to slightly stronger than Wall Street’s average forecast for $4.45.

Underscoring how corporate budgets are starting to loosen, HP’s revenue from industry-standard servers leapt 54 percent.

Analysts said growth in corporate-oriented businesses should help offset some of the impact from a weakening European currency. The company gets some three-fifths of its revenue from outside the United States.

“HP’s increased revenue and EPS guidance will help alleviate investor concerns about the potential impact from euro weakness and dilution from recent acquisitions,” said Cross Research analyst Shannon Cross.

Chief Financial Officer Cathie Lesjak said the company is outperforming its peers and not simply riding the wave of overall U.S. economic recovery [ID:nNLLEGE63G].

“The share gains that we had in the industry standard server (market) is pretty impressive,” she said. “And that shows that we are doing better than just the economic recovery would suggest.”

Lesjak added that HP remained on the prowl for appropriate acquisitions in the wake of its purchase of ailing smartphone maker Palm Inc PALM.O for $1.2 billion.


The company, founded by Bill Hewlett and Dave Packard in a Palo Alto, California, garage in 1939, has likely grabbed market share from International Business Machines Corp IBM.N and other rivals in the business of offering technology services.

“HP is pretty unique in being the broadest player in the industry in terms of geography and product lines,” Shaw Wu of Kaufman Bros said. “That strategy that they have looks like it’s paying off, being the broadest player. IBM made a decision to exit PCs so they are not as broad.”

The company's diverse revenue streams and obsessive focus on costs kept it relatively well-cushioned from the worst of the economic downturn. With the economic climate improving, investors are expecting solid growth even as it goes head-to-head with a growing cast of rivals in the tech sector, including Oracle Corp ORCL.O and Cisco Systems Inc CSCO.O.

HP is the world’s largest technology company by revenue, and its businesses span the IT ecosystem. Under CEO Mark Hurd, it has moved aggressively into new markets and is now a force in PCs, servers, IT services and printers.

“It’s about diversification and having a portfolio, which is HP’s key advantage,” Wu said.

HP reported a net profit of $2.2 billion, or 91 cents a share, in the fiscal second quarter ended April 30, up from $1.7 billion, or 71 cents a share, a year ago.

Excluding items, profit was $1.09 a share. Analysts on average had expected $1.05 a share, according to Thomson Reuters I/B/E/S.

Net revenue rose 13 percent to $30.8 billion, compared with Wall Street’s forecast of $29.8 billion.

Shares of HP rose to $48.15 in extended trading after closing at $46.79.

HP shares are down about 8 percent for the year. By contrast, shares of IBM are about flat, and Dell Inc DELL.O has climbed about 6 percent over the same period. (Reporting by Franklin Paul; Writing by Edwin Chan; Editing by Richard Chang)