HP BEATS Q4 FORECASTS AS PROFIT SURGES

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HP Beats Q4 Forecasts As Profit Surges
Hewlett-Packard  turned in another quarter of revenue and earnings growth on strong sales of PCs and printers, its core product lines.
The technology giant reported a 33% rise in fiscal fourth quarter earnings to 68 cents a share, excluding items, beating views by 4 cents. Sales rose 7% to $24.6 billion, edging past most forecasts and exceeding the 5% to 6% range for the first time in seven quarters.”The PC numbers and continued strength in the printing business certainly bode well for the company’s future,” said Bill Fearnley of FTN Midwest.For the current quarter, HP sees earnings of 60 to 62 cents per share, just over views.HP also said the Securities and Exchange Commission has opened a formal probe into a spying scandal that has already led to the indictments of HP’s former chairwoman, a former executive and private detectives hired to root out the source of board leaks to the press.The detectives snooped on several executives, board members and news reporters, and unearthed their phone records, possibly illegally.Even amid the spying scandal, HP’s story under Chief Executive Mark Hurd continues to be one of steady sales growth amid cost cutting to boost profits.The company has nearly completed plans to cut 15,200 jobs and is consolidating data centers, call centers and real estate holdings.HP has also boosted efforts to work with resellers to improve sales. It’s providing more training and marketing support, and offering incentives to sell HP-branded printers and other accessories.”We’re seeing HP work with resellers and engage customers more frequently and effectively to better defend their installed base of equipment,” said Daniel Renouard, an analyst with Robert Baird.Personal computer sales rose 10% over last year to $7.8 billion as consumers and businesses snapped up notebooks. Sales of desktop PCs changed little.HP leapfrogged Dell (DELL) to become the world’s top PC seller in the third quarter of 2006, according to market share figures released last month by research firms IDC and Gartner.Printer sales rose 7% to $7.3 billion and operating profits jumped 23%, helped by sales of high-margin color laser and multifunction printers.Servers and storage sales grew 4% to $4.7 billion as blade server sales offset tepid sales of networked storage. Operating profit surged 24%.Services revenue rose 5% to $4.1 billion, led by a 16% jump in managed services.Software sales grew 14% to $349 million.

HP’s growth prospects are mixed.
Corporate profits, the largest driver of IT spending, remain healthy.But many companies are turning to virtualization technology to tap unused computing resources rather than buy new equipment. That could dent hardware sales, said Raymond James analyst Brian Alexander.Holiday sales of PCs and printers will be critical for HP given its reliance on consumers.Fearnley said HP’s “PC sales momentum continues to be very strong because they have been aggressive on pricing.”But consumers may delay purchases until Microsoft’s January release of its Vista operating system.HP also faces the threat of resurgent price competition from Dell.

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November 21, 2006 at 12:03 PM