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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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