SAN FRANCISCO (Reuters) - Hewlett-Packard Co (HPQ.N), reassuring investors worried about growth after the surprise departure of ex-CEO Mark Hurd, forecast 2011 results that surpassed Wall Street expectations and propped up its shares.
The world’s largest tech company underscored its potential in still-evolving markets for mobile devices such as tablets, storage and networking. But competition in those areas is fierce and getting fiercer.
HP, which has become known for its cost-cutting, also made an effort to stress its investments, including adding several thousand employees to its sales corps.
HP forecast 12 to 14 percent growth in non-GAAP earnings in fiscal 2011 and revenue growth of 5 to 7 percent, helping its shares gain more than 1 percent in after-hours trade.
But the company did not announce who will takeover as CEO, despite hopes among some investors it would do so at its annual analyst meeting on Tuesday.
Following Hurd’s controversial ouster, shareholders have grumbled about HP’s spending on acquisitions, and worried about newly aggressive rivals such as International Business Machines Corp (IBM.N) to Oracle Corp ORCL.O.
Investors got a fresh look at several executives said to be competing for the top job, including PC group head Todd Bradley and enterprise division chief Ann Livermore.
Interim CEO Cathie Lesjak emphasized what she called HP’s “extraordinary opportunity” to grow, noting its global reach and an addressable market she pegged at $1.6 trillion in 2013.
Lesjak also defended the company’s innovation strategy. IBM CEO Sam Palmisano this month blasted HP for having focused too much on shaving costs and not spending enough on research and development to drive growth.
“Innovation has, is, and will continue to be the core of Hewlett-Packard,” Lesjak told analysts, noting that the company will increase R&D spending faster than revenue next fiscal year.
For fiscal 2011, HP forecast a rise in earnings, excluding items, to $5.05 to $5.15 a share on revenue of $131.5 billion to $133.5 billion. Wall Street is targeting earnings of $4.99 a share on revenue of $131.4 billion, according to Thomson Reuters I/B/E/S.
HP also forecast an operating margin of 11.6 to 11.8 percent for fiscal 2011, as the company aims to maintain profitability improvements that began in earnest under Hurd.
For fiscal 2011, HP expects 6 to 8 percent growth in its PC business, 2 to 4 percent growth in services, 3 to 4 percent growth in its printing group, and 7 to 9 percent growth in its storage, servers and networking segment.
Its shares have fallen about 10 percent since Hurd’s departure on August 6. The company trades at just over 9 times forward earnings, a discount to peers such as IBM and Cisco Systems Inc (CSCO.O).
Shares of HP closed at $41.63 on the New York Stock Exchange and rose 1.3 percent to $42.19 in extended trading.
Investors are eager for someone take the reins at the iconic Silicon Valley company, which pioneered a management and innovation model that became known as “the HP Way.”
But while still a dominant force in PCs, printers, servers and services, HP confronts a changing IT landscape dominated by a number of behemoths slugging it out for a slice of tech spending. New rivals have swelled the ranks of traditional foes such as IBM and Dell DELL.O.
Hurd overhauled HP by slashing costs and boosting efficiency, but investors are pressing for growth. That is expected to come primarily from HP’s enterprise business.
Livermore said HP was expanding sales coverage in the services business, which provides the bulk of the revenue in the enterprise business. Bradley said HP is also adding headcount as it aims to muscle in on the fast-growing market for smartphones and tablet devices.
Acquisitions are key to HP’s growth, and the company went on a spending spree in the past month. Analysts estimate it has spent more than $20 billion on acquisitions over the past two years.
It outlasted Dell in an expensive bidding war for data storage company 3PAR Inc, and also agreed to purchase to security software company ArcSight Inc.
Those acquisitions came on the heels of deals for networking equipment maker 3Com and smartphone maker Palm. Some on Wall Street have wondered how HP plans to digest all of it.
Reporting by Gabriel Madway; Editing by Edwin Chan, Bernard Orr and Richard Chang