HP revenue grows, boosted by Europe, Asia

HP reported earnings of $0.37 per share on revenues of $21.6 billion for its second fiscal quarter Tuesday.

Led by strong revenue growth outside of the U.S., Hewlett-Packard on Tuesday reported revenue of US$21.6 billion for its second fiscal quarter of 2005. These results were the first to be issued by HP since president and chief executive officer (CEO) Mark Hurd took the reins in late March, and they were slightly ahead of Wall Street's expectations.

HP said revenue in Europe, the Middle East and Africa grew by 10 percent, year-over-year, to US$9.1 billion for the quarter, which ended April 30. In Asia, revenue was up 9 percent, to US$3.6 billion. Both regions outperformed the U.S. which grew by just 4 percent during the period, totalling US$8.8 billion.

Overall, the company's revenue was up 7 percent from the year-ago quarter. HP reported net income of US$1.2 billion, or US$0.33 per share, when measured using Generally Accepted Accounting Principles. (GAAP) When measured using non-GAAP methods, net income was US$1.3 billion, or US$0.37 per share.

Analysts had been expecting revenue of US$21.4 billion and earnings per share of US$0.36 on a non-GAAP basis, according to a survey conducted by Thomson First Call.

Hurd, who was credited with restoring the fortunes of his former employer, NCR, succeeded Carly Fiorina in late March, nearly two months after she was ousted by HP's board.

HP's new chief executive sees "room for improvement," in many of the company's businesses, the company said in a statement. But HP did not provide any details on how that improvement may be achieved or when any major changes might be disclosed.

One of Hurd's main challenges will be to develop a clearer strategic focus for HP, which sells a vast array of products and services. "We see a partly healthy printing strategy and little strategic thinking in the remainder of the portfolio," wrote Merrill Lynch & Co. analyst Steven Milunovich in a report published Monday.

"Most users don't want to see HP broken up, but they do want HP to find its differentiation," wrote Milunovich, citing a recent Merrill Lynch survey of 100 chief information officers (CIOs) in the U.S. and Europe. Nearly half of the CIOs surveyed said that their commitment to HP had decreased over the past three years, and 56 percent of them felt that HP's 2002 acquisition of Compaq Computer was not "smart."

Though layoffs still loom, Hurd did find one way to make a good impression on his new employees. Starting May 1, the company began a company-wide wage review, Hurd said. "It's the first time in two years, that there's been a salary increase for the workforce," he said.

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Robert McMillan

IDG News Service
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