OT: HP Tops Views As Its Earnings Jump By 50%
Ken Spencer Brown
Tue Aug 16, 7:00 PM ET
Hewlett-Packard and its new chief executive got a big boost Tuesday when the company posted its strongest quarterly results since 2003.
HP (NYSE:HPQ - News) earned 36 cents a share, minus special costs, in the fiscal third quarter, which ended in July. That was a nickel over analysts' estimates and 50% higher than last year's earnings. Sales grew 10% to $20.8 billion, also beating views.
Its outlook was equally upbeat. For the fourth quarter, HP now expects sales of $22.4 billion to $22.8 billion -- in line with outside forecasts. It expects earnings of 44 to 47 cents a share, 6% over views.
The news, which sent shares up about 7% in after-hours trading, came a year after former CEO Carly Fiorina stunned investors with an earnings warning. She was fired in February.
CEO Mark Hurd, who took over in March, said he was pleased with the latest quarter, which is typically HP's weakest and least predictable. "There's still hard work ahead of us," he said in a conference call. "The good news is that the people at HP know what we have to do."
Sales for the firm's corporate storage and server group, which was largely to blame for last year's breakdown, leaped 20% to $4 billion. The increase was driven by a 28% jump in Intel-compatible server sales.
Sales for HP's all-important printer unit grew 5% to $5.9 billion. But profit fell 8% as the printer market continued to slow.
The personal computer business, meanwhile, grew 8%. Strong laptop sales offset a slight drop in sales of desktop systems. Overall unit sales grew 14%.
Revenue from services rose 10% to $3.8 billion.
HP shares have already climbed about 20% since Hurd's arrival in March. Analysts credit the new chief's cost-cutting efforts. Last month HP said it would slash 14,500 jobs, a 10th of its work force, to save $1.9 billion a year.
The new HP is a tighter ship than it was under Fiorina, analysts say.
"It's important to operate efficiently," said Illuminata analyst Gordon Haff, who praised Hurd's efforts. "Just having grand visions doesn't buy you anything."
Hurd came to HP from the computer maker NCR (NYSE:NCR - News). His successful turnaround strategy at that company earned him a reputation as an operations guru.
Hurd also has reversed some of Fiorina's most visible actions. In June, he split up the printer and personal computer groups, six months after Fiorina merged them.
And this month, HP ended a deal to resell Apple Computer (NasdaqNM:AAPL - News) iPods. Fiorina trumpeted the deal in 2004, saying it was a better option than HP making its own digital music player.
Hurd has made several major hires.
Last month, he lured away Dell's (NasdaqNM:DELL - News) chief information officer, Randy Mott, to take the same job at HP. In June, HP hired former Palm (NasdaqNM:PALM - News) chief Todd Bradley to head its newly separated PC unit.
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