HP profit climbs 28 percent, company raises outlook again

Printer, industry-standard server and PC businesses report strong growth

Hewlett-Packard's first-quarter profit increased by 28 percent from a year earlier as growth returned to some of its core businesses, prompting the company to raise its forecast again for the fiscal year.

HP's profit for the quarter ended Jan. 31 was US$2.3 billion, up from $1.9 billion in the same quarter last year. Revenue increased by 8 percent to $31.2 billion, HP announced Wednesday.

The company's printer, industry-standard server and PC businesses all reported revenue growth, HP said -- a turnaround from last quarter, when sales declined in almost all of its main business segments. Revenue from HP's giant services segment decreased by 1 percent, however, to $8.7 billion.

"HP is well-positioned to outperform the market," Chairman and CEO Mark Hurd said in a statement. "The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook."

Excluding one-time items, HP reported pro forma earnings of $1.10 per share, up from $0.93 a year earlier. Analysts had expected pro forma earnings of $1.06 per share on revenue of $30.01 billion, according to a poll by Thomson Reuters.

The results are another sign that parts of the tech industry are emerging from the recession. Last month IBM reported its first quarterly revenue increase in more than a year, and said profits were up 10 percent from a year earlier.

HP suggested late last year that conditions were improving, when it raised its revenue target slightly for fiscal 2010. On Wednesday it raised the outlook again, this time by a larger amount. It now expects full-year revenue of $121.5 billion to $122.5 billion.

HP's PC business did well, with sales up 20 percent from a year earlier to $10.6 billion. Industry-standard servers also had a good quarter, with sales up 27 percent, helped by higher-priced configurations of HP's G6 Proliant servers.

"We haven't seen the kind of ASPs [average selling prices] we had in industry-standard servers for a long time," Hurd said on a conference call.

Printer shipments increased by 16 percent, the biggest increase at HP for three years, said Chief Financial Officer Cathie Lesjak. However, the company is still struggling with a shortage of laser printers, which looks set to continue for another quarter or two.

HP's services group, its second-largest after the PC division, saw declines in all areas. Hurd repeated what he said last quarter -- that HP sees a "strong pipeline" for deals -- but said the recovery in services spending will take longer than that for hardware. Last month IBM reported a 2 percent increase in revenue for its services business.

Other weak areas were storage, where revenue was down 3 percent, and "business critical systems," including HP's Integrity and Nonstop computing systems, where sales were off 22 percent from last year. That continues a trend away from proprietary high-end hardware and toward standard-based x86 systems.

On the whole, the HP executives were upbeat and clearly believe HP is positioned well for the economic recovery. The company is on track to close its 3Com acquisition by midyear, Lesjak said, which will broaden HP's menu of networking products.

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James Niccolai

IDG News Service
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