Strong demand outside the U.S. for Hewlett-Packard Co.'s computers, printers and other products widened its profit margin in its second quarter, but investors worry the trend will break as HP buys Electronic Data Systems Corp. this year.
The results released Tuesday came as no surprise because HP provided a snapshot of its latest quarterly earnings and revenue last week when the Palo Alto-based company jolted investors with its planned $13.2-billion acquisition of technology services specialist EDS.
The deal has raised concerns that Plano, Texas-based EDS would cause more trouble to HP than it's worth and slow the financial momentum building at HP since it hired Mark Hurd as chief executive a little over three years ago.
"Make no mistake about it: We will get the cost right and we will create value for shareholders," Hurd said of the acquisition during a conference call.
In its second quarter, which ended in April, HP earned $2.06 billion, or 80 cents a share. That represented a 16% increase from a profit of $1.76 billion, or 65 cents, in the year-earlier period. Revenue rose 11% to $28.3 billion. Excluding acquisition costs, HP said operating profit margin rose to 10% in the second quarter, up from 9% a year earlier.
HP's international diversity is helping to offset the debilitating effects of the U.S. economy's weakness.
Markets outside the U.S. accounted for 70% of HP's second-quarter revenue.