Hewlett-Packard net income jumps 28 pct on stronger PC, server sales; raises 2010 outlook

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HP net income jumps 28 pct; raises 2010 outlook

SAN FRANCISCO — Hewlett-Packard Co.’s net income jumped 28 percent in the latest quarter as stronger demand for computers is helping to heal a battered technology industry.

The company also raised its 2010 forecast, sending shares higher.

The results mark a continued growth in profit at the world’s No. 1 maker of personal computers and printers. Although HP had been making money even during the height of the recession, its net income had been getting smaller each quarter. But for three straight quarters now, net income has been growing.

The numbers show how deeply dependent HP is on PCs even as it expands aggressively into more profitable areas, such as technology services and computer networking.

HP said after the market closed Tuesday that it earned $2.2 billion, or 91 cents per share, in its fiscal second quarter, which ended April 30. It earned $1.7 billion, or 71 cents per share, in the same period last year.

Excluding special items, it earned $1.09 per share. Analysts expected $1.05 per share on that basis.

Revenue rose 13 percent to $30.8 billion, better than the $29.8 billion that analysts polled by Thomson Reuters expected. In the same quarter a year earlier, revenue was $27.4 billion.

For 2010, HP is now predicting profit of $4.45 to $4.50 per share, excluding special items. That’s higher than its previous forecast of $4.37 to $4.44 per share. The higher outlook excludes 69 cents per share in one-time costs, largely related to HP’s restructuring and acquisitions.

When those costs are included, HP now expects its 2010 net income to be $3.76 to $3.81 per share, which is down from its earlier estimate.

The company has been on a buying binge recently as its dependence on PCs wanes.

HP, which is based in Palo Alto, Calif., said last month that it’s buying smart-phone pioneer Palm Inc. for $1.4 billion in a bid to beef up HP’s very small mobile phone business. HP’s $2.7 billion acquisition of 3Com Corp. makes HP a stronger player in computer networking.

Robust consumer demand has helped buoy PC makers and their suppliers, even as they grapple with anemic corporate appetites for new PCs. HP’s PC division posted a 21 percent revenue increase over last year.

Cathie Lesjak, HP’s chief financial officer, said in an interview that HP saw an “uptick” in orders from smaller businesses and the financial services industry. But as previously predicted, Lesjak said, spending by large corporations “refreshing” their PC fleets will remain weak until the second half of this year.

“We’re not calling for a really big uptick in corporate refresh at this point in time, but we’re definitely seeing some signs there,” she said.

HP is increasingly focused on its services business, which was beefed up with the $13.9 billion purchase of Electronic Data Systems in 2008. The services division is now one of HP’s most profitable, alongside its cash-cow printer-ink business.

The ink business, however, is under pressure from generic ink makers with lower prices. Services, meanwhile, have largely proven resilient in the down economy, as companies look to outsourcers such as HP and IBM Corp. for ways to cut costs.

Shares jumped 84 cents, or 1.8 percent, to $47.63 in extended trading after the release of results Tuesday. Earlier, it closed down 73 cents, or 1.5 percent, at $46.79.