Hewlett-Packard profit jumps 25 pct, beating analyst forecasts; company raises 2010 outlook
By APWednesday, February 17, 2010
HP profit jumps 25 pct, company raises outlook
SAN JOSE, Calif. — Hewlett-Packard Co.’s profit swelled 25 percent in the latest quarter because of cost-cutting and a stronger showing from its personal-computer division.
Revenue was up in most of the technology company’s major divisions and HP raised its 2010 outlook, citing “accelerating market momentum.”
The numbers show that technology spending by corporations is creaking back to life. HP is a bellwether because it is the world’s biggest maker of PCs and printers. And HP’s latest results are the first from a major tech company to include the full month of January.
“It’s better than expected,” said Jayson Noland, an analyst with Robert W. Baird & Co. “The hardware side of their business bounced back really nicely, especially the PC and server divisions.”
HP said after the market closed Wednesday that its net income was $2.3 billion, or 96 cents per share, for the three months ended Jan. 31. In the same period last year, it earned $1.9 billion, or 75 cents per share.
Excluding one-time items, HP said it would have earned $1.10 per share. That beat the average estimate of $1.06 per share, according to analysts surveyed by Thomson Reuters.
Revenue jumped 8 percent to $31.2 billion, exceeding analyst forecasts for $30.0 billion.
Services was the only major HP division to suffer a decline. Revenue fell 1 percent even as the division got more profitable, a difference likely explained by CEO Mark Hurd’s aggressive cost cuts to that business. Services represent HP’s latest challenge against rival IBM Corp. and are a cornerstone of a major makeover for HP.
Cathie Lesjak, HP’s chief financial officer, said the decline was in line with the performance of the overall market. She said that indicated HP is holding market share in services, a business HP bought its way into in 2008 with the $13.9 billion acquisition of Electronic Data Systems. HP is eliminating 24,600 jobs as part of the EDS takeover.
HP was helped in the quarter by the rollout of computers loaded with Microsoft Corp.’s Windows 7 operating software, which helped drive sales of PCs to consumers, Lesjak said. Corporations aren’t expected to spend heavily on new PCs until the second half of the year, though.
HP’s 2010 forecast now calls for $121.5 billion to $122.5 billion in revenue, exceeding the $120 billion analysts were expecting.
Net income is expected to be $3.79 per share to $3.86 per share, or $4.37 per share to $4.44 per share excluding charges. Analysts were expecting $4.37 per share, excluding charges.
In the last quarter, HP’s PC division posted its first revenue increase in over a year, rising 20 percent to $10.6 billion. Operating profit was up 22 percent.
One reason big companies are still reluctant to buy new PCs is they need time to test how Microsoft’s new software interacts with their internal applications, Stacy Smith, chief financial officer of Intel Corp., said last month. Intel supplies 80 percent of the microprocessors that power modern PCs and computer servers.
Already, new chips from Intel are helping to boost server sales, which slumped as corporate and government technology budgets shrunk. HP’s server division reported an 11 percent revenue jump Wednesday.
IBM’s latest numbers included a 37 percent increase in revenue in the division that sells servers with Intel chips. HP and IBM are tied as the world’s No. 1 server sellers.
HP shares rose 39 cents to $50.51 in after-hours trading.
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