HP earnings increase 38%
Hewlett-Packard Co. on Tuesday bucked the recent downbeat trend of other high-tech bellwethers, reporting a 38% jump in first-quarter profit.
The Palo Alto-based technology company also raised its forecast for the full year. Its confidence surprised analysts, who have worried about the effect of a possible U.S. recession on high-tech in the wake of pessimistic forecasts from Cisco Systems Inc., Ingram Micro Inc. and others.
Double-digit revenue growth in international markets offset slower sales growth in the U.S., HP said.
Strong computer sales also helped boost revenue, which rose 13% to $28.5 billion for the quarter ended Jan. 31. HP posted a profit of $2.1 billion, or 80 cents a share, up from $1.5 billion, or 55 cents, a year earlier.
Excluding some one-time expenses, HP beat by 5 cents a consensus estimate from analysts surveyed by Thomson Financial.
“They seem stronger than their competitors,” said Shaw Wu, an analyst with American Technology Research. “They are well-positioned, [they are] in all the right markets and they are not seeing as much turmoil in the U.S. as other companies.”
HP shares rose 8 cents to $43.95 before the earnings report, then nearly 5% to $46.12 in extended trading.
HP’s resilience stemmed from its presence in emerging markets, analysts said. In the first quarter, 69% of HP’s revenue came from outside the U.S., up from 60% five years ago.
Quarterly revenue grew 6% in the U.S.; revenue from Brazil, Russia, India and China collectively grew 35%, when adjusted for currency.
“We have a good position from a geographic deployment perspective,” HP Chief Executive Mark Hurd said in a call with industry analysts.
Hurd acknowledged that bigger economic trends could affect the company. He said HP’s U.S. consumers spent a little less and that HP was trying to bolster its domestic business.
He vowed to continue cutting costs, saying “we control many of the levers that drive our performance.”
Hurd predicted revenue of $27.7 billion to $27.9 billion and earnings per share of 83 cents to 84 cents, which would exceed analysts’ expectations. HP raised its full-year revenue forecast to $114 billion, up from $111.5 billion.
Computer sales continued to be strong, with notebooks growing 37% and desktops increasing 15%. Although HP didn’t break out computer sales per region, analysts said they suspected that HP was gaining PC market share internationally.
“The demand for computers is certainly healthier than what people thought,” said Brent Bracelin, a senior analyst with Pacific Crest Securities. “It suggests spending on technology globally is pretty healthy.”
At the end of 2007, HP had 19% of the worldwide PC market, compared with 14.6% for Dell Inc., according to research firm IDC. HP is No. 2 in the U.S., with 24% of the market compared with Dell’s 30%. Acer Inc. was a distant third both globally and in the U.S.
HP’s printer and imaging business, which for years was its crown jewel, saw its financial effect continue to wane. Its sales grew only 4% to $7.3 billion. Hurd said the group had missed some sales opportunities and was focusing more on graphic arts and corporate customers.