Hewlett-Packard Says Results Exceed Forecasts

Hewlett-Packard Co., battling for shareholder approval to acquire Compaq Computer Corp. for $23.8 billion, said Monday that its fiscal first-quarter sales and profit beat forecasts as consumer demand for personal computers and printers picked up.

Earnings in the period ended Thursday were substantially more than 16 cents a share, the average estimate of analysts polled by Thomson Financial/First Call, and sales exceeded expectations, HP said.

Hewlett-Packard’s report came less than two weeks after Compaq raised its targets for 2002 sales and profit. HP Chief Executive Carly Fiorina said the improved results showed that buying Compaq wouldn’t crimp earnings, a claim made by director Walter Hewlett in his challenge to the purchase. Some investors and analysts said the earlier forecasts may have been too low.

“They set a very low standard for themselves,” said Tom Rath, a fund manager at Safeco Asset Management Co., referring to Hewlett-Packard. “It was important for them in regards to convincing shareholders to vote for the merger.” Safeco, which manages about $30 billion in assets, owned 911,300 Hewlett-Packard shares as of December.

Shares of HP, the second-largest computer maker, rose 4 cents to close at $22.04 on Monday and have gained 7.3% this year. Houston-based Compaq, the second-largest PC maker, rose 10 cents to $12.20, 12% less than the value of Hewlett-Packard’s offer. Compaq has risen 25% in 2002. Both stocks trade on the New York Stock Exchange.

Hewlett-Packard is motivated to be “as bullish as possible, given the tenuous nature of the deal” with Compaq, Kimberly Alexy, an analyst for Prudential Securities Inc., wrote in a research report.

First-quarter sales rose moderately from the fourth quarter ended in October, HP said. On Nov.14, the company said sales would fall. The average estimate of analysts polled by First Call was sales of $10.65 billion. Fourth-quarter revenue was $10.9billion.

“We are not distracted by the merger or the challenges of integration, and our customers are not defecting,” Fiorina said in a speech broadcast on the Internet from the Goldman, Sachs & Co. Technology Investment Symposium in La Quinta, Calif.

In last year’s first quarter, Hewlett-Packard had net income of $328 million, or 17 cents a share, on sales of $11.9 billion.

HP said it would report final first-quarter results Feb. 13.