HP results lifted by laptops, EDS buyout
Laptop sales outperform printer and desktop PC businesses, while enterprise hardware results were mixed.
James Niccolai (IDG News Service) 25 November, 2008 12:16
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Hewlett-Packard reported a 19 percent jump in revenue for the October quarter, lifted by its EDS acquisition and strong sales of laptop computers and blade servers.
The company's printer and desktop PC businesses fared less well, however, and results from HP's enterprise hardware business were mixed.
Chairman and CEO Mark Hurd was upbeat about the results, saying HP's geographic reach and wide product portfolio are helping to shield it against the effects of the tough economy. But like his peers at other big tech companies, Hurd was cautious about the future.
"We think it will be a challenging environment and we're planning as such," he told reporters during a conference call to discuss the results.
Revenue for HP's fourth fiscal quarter, ended Oct. 31, was US$33.6 billion, up 19 percent from a year earlier, or up 5 percent excluding the effect of the EDS acquisition. Net profit was $2.1 billion, down from $2.2 billion in the same quarter last year. Excluding one-time charges, net profit climbed 13 percent to $2.6 billion.
HP had already preannounced its financial results last week, so Monday was more about seeing which product divisions did well and which fared poorly.
Revenue from HP's Personal Systems Group climbed 10 percent to US$11.2 billion, with unit shipments up 19 percent. A 21 percent jump in notebook sales offset a 2 percent decline in HP's desktop PC business.
Revenue from its Imaging and Printing group declined 1 percent to US$7.5 billion. Sales of printer ink and other supplies climbed 9 percent, but sales of actual printer hardware declined by 21 percent to consumers and 10 percent to businesses.
That decline isn't necessarily bad for HP so long as it doesn't lose market share, Hurd said. That's because HP makes more money from printer supplies than it does from the machines themselves. "The main thing is that people continue to print on HP printers," even if they delay buying new printers for a while, said HP CFO Cathie Lesjak.
The Enterprise Storage and Servers division also reported a slight dip in revenue, falling 1 percent to US$5.1 billion. HP's storage gear and blade servers sold well, but revenue from industry-standard and high-end servers declined, HP said.
Revenue from the services division almost doubled to US$8.6 billion, mostly from the EDS buyout, while revenue from software increased 13 percent to $885 million.
Despite the cautious outlook, Hurd sounded more confident on the call than the heads of some other big tech companies, notably Intel, Dell and SAP, which have all discussed a sharp slowdown in customer spending.
"I'm confident in HP's ability to gain share, expand earnings and emerge from the current environment in a meaningfully stronger competitive position," Hurd said.
"We believe that we held or gained share in every segment" during the quarter, he added.
This was HP's first earnings report since completing its acquisition of services giant EDS in August. Hurd said the integration of the companies is on track or ahead of the plan it outlined in September.
As part of its cost-cutting efforts, HP has been reducing its research and development expenses for the past several quarters, from US$914 million in the fourth quarter last year to $842 million in the quarter just ended.
Lesjak said the cuts have been mostly in the printing group, where HP axed some "favorite science projects,"and in the storage and servers group. HP is having to invest less in its proprietary server hardware as it moves toward selling exclusively Intel- and AMD-based servers.
HP earned just over two-thirds of its revenue in the quarter from outside the US Revenue from the BRIC countries -- Brazil, Russia, India and China -- grew fastest, climbing 23 percent from the year before, to account for 9 percent of the total, or about US$3 billion, HP said.
For the current quarter, HP expects revenue of between US$32 billion and $32.5 billion, with earnings per share of $0.80 to $0.82 on the basis of generally accepted accounting principles. For the full year it expects revenue between $127.5 billion and $130 billion, and GAAP earnings per share between $3.38 and $3.53.
HP's shares have jumped about 22 percent since it issued the preliminary results last week. They ended regular trading hours Monday at $35.70, but slipped back about 1 percent after-hours following the final earnings report.
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