HP benefits from Q1 holiday sales

Hewlett-Packard Co. posted better-than-expected results Wednesday for its first quarter, as the company benefited from strong PC and printer sales during the holiday season, reporting revenue of US$11.4 billion.

The revenue for the first quarter, which ended Jan. 31, compares with revenue of $12.4 billion in the same period last year for an 8 percent decline year-over-year, according to a statement from HP.

The company posted $0.29 in pro forma earnings per share for the quarter, which excluded $86 million in various charges. Analysts polled by Thomson Financial/First Call forecasted that HP would show $0.25 earning per share for the quarter.

Including the extraneous charges, HP reported earnings per share of $0.25, the company said in the statement.

HP made $564 million in profit for the period, excluding the charges. This compares to $812 million in the quarter a year ago.

Earlier this month, HP said its earnings and revenue figures would likely be higher than previously forecast due to the stronger seasonal sales.

"Clearly, the consumer segment of the business came in quite strong," said Naveen Bobba, research analyst at Bear Stearns & Co. Inc. "Holiday demand was higher than expected."

HP's consumer PC revenue jumped 53 percent over the previous quarter, confirming the strong holiday gains. Digital camera and photo printer revenue also surged 30 percent over last quarter and 34 percent over last year's first quarter, according to a statement.

Even with the positive quarter, HP Chairman and Chief Executive Officer Carly Fiorina warned that spending in the technology sector is not likely to pick up soon.

"We continue to believe a recovery won't occur until the second half of this year," Fiorina said, during a conference call with press and analysts.

Slow sales of products directed toward business customers continue to make the company cautious about coming quarters.

Unix server revenue fell 21 percent compared to last year's first quarter, and revenue from servers based on 32-bit Intel Corp. processors also dropped 21 percent from that quarter. Storage revenue sank as well, dipping 13 percent from a year earlier.

"While the holiday spending season was a pleasant surprise, we are not counting on it repeating in this post-holiday quarter," Fiorina said.

The company expects second-quarter revenue to fall slightly below the first quarter's total.

Sales in almost every region fell when compared to figures from the first quarter of 2001. China, however, provided a bright spot with 9 percent growth.

Last week, HP set March 19 as the date for its shareholder meeting to vote on its planned acquisition of Compaq. HP shareholders on record as of Jan. 28 will be allowed to vote on the deal. Compaq shareholders will vote on the acquisition the following day.

Hewlett and Packard family heirs have voiced their disapproval on the deal and said they plan to vote against it. The Hewlett and Packard families and related organizations control close to 18 percent of HP stock.

Walter Hewlett, the son of one of HP's founders and a company board member, has been the most vocal objector to the deal. Hewlett has sent out various public statements and letters to HP shareholders listing his reasons for opposing the acquisition. At the top of the list, Hewlett claims the merged companies would place too much emphasis on a low margin PC business and detract from revenue generated by printing equipment sales.

HP has countered Hewlett's every objection, sending out statements of its own and setting up a Web site to defend the deal. Six HP board members sent a letter to Hewlett on Wednesday, saying they were "disappointed" with the way Hewlett has objected to the acquisition. The group cited a stronger high-end server business, a larger services organization and a better business software portfolio as reasons for approving the deal.

Hewlett issued yet another statement after HP released its earnings, saying the positive quarter shows that the company can thrive without merging with Compaq.

Shares of HP (HWP:NYSE) were up slightly during Wednesday's trading and closed at $20.98.

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