HP 2nd-Quarter Profit Up 34%, Beating Forecasts
Hewlett-Packard on Monday turned in its third straight quarter of profit above Wall Street expectations and predicted even stronger sales and profit margins as it focuses on more profitable computers and printers.
The Palo Alto-based company’s fiscal second-quarter earnings jumped 34% to $918 million in the three months ended April 30, from $685 million in the same period a year earlier, helped in part by improvements in Asian economies.
Earnings-per-diluted share of 88 cents, including a 2-cent special gain from an equity sale, were well above the average of 80 cents per share projected by analysts surveyed by Zacks Investment Research.
Sales grew by just 3% to $12.4 billion, but executives said they were planning for revenue gains of between 10% and 13% in the next six months.
“We are making real strides in our execution, our focus and our speed,” said Chief Financial Officer Robert Wayman in a conference call with analysts. HP shares rose to $88.63 in after-hours trading, after jumping $2 to close at $86.19 in regular trading on the New York Stock Exchange.
“The results were good, but the outlook was even better,” said analyst Dan Niles of Banc Boston Robertson Stephens, citing a 10% rise in product orders that will soon turn into revenue.
The world’s fourth-largest PC maker said it is the fastest-growing among all PC firms that rely mainly on sales through dealers and retailers. And it said demand was strong for its more expensive and more powerful computer servers.
The results give a boost to HP as it prepares to split off its original, highly profitable testing and measurement business, which makes devices used in manufacturing a broad range of communications and other technical equipment.
The costs of that split will hurt earnings in the next quarter as the company spends more on administration and new hiring, said Chief Executive Lewis Platt, who will step down after successors are chosen to lead each company.
The company’s improvements came in a variety of areas, including home personal computers and color laser printers.
“The company’s performance is improving,” said analyst John Jones of Salomon Smith Barney. “In every segment, they had better orders than I expected.”
But Hewlett-Packard has yet to become a serious force in Internet software and consulting.
The company is expected to announce today more pieces of its electronic-commerce strategy, a set of applications that will run on various types of computers, analysts said. The move would follow the lead of IBM, the world’s biggest computer company. IBM’s Internet services effort has helped it rebound and thrive even as prices for most personal computers continue to fall.
Not all the major computer companies have been as fortunate as HP and IBM. While Compaq Computer management blamed falling demand for computers for its poor results last quarter, the company’s board thought otherwise. It forced the resignation of CEO Eckhard Pfeiffer.
Wayman said HP isn’t getting hurt by a sales slowdown.
“We’ve been growing at 1.5 to 2 times the market growth rate, and I think we can continue to do it,” he said.
Dell, the largest of the computer makers that sell directly to consumers and businesses, will report quarterly results after the market closes today.
* MORE EARNINGS: C2
