HPs Hurd Confident, Pushes for Better Performance

Hewlett-Packard's CEO says he is "encouraged" by the company's Q3 results, which exceeded expectations, but hard work remains.

SAN FRANCISCO—Hewlett-Packard, the worlds No. 1 printer maker and the No. 2 shipper of personal computers, on Aug. 16 reported strong Q3 financial results that exceeded Wall Street analysts expectations.

HP, based in Palo Alto, Calif., reported a fiscal third-quarter profit of $1.38 billion—or 48 cents per share—compared to $73 million, or 3 cents a share a year ago. Overall revenue increased 5 percent from $20.8 billion to $21.89 billion.

"Were obviously pleased about how were doing now and confident about the road ahead," President and CEO Mark Hurd told a conference call of reporters and analysts.

Some two dozen analysts surveyed by Thomson One, of The Thomson Corp, with U.S. headquarters in Stamford, Conn., had predicted HP would report $21.8 billion in revenue and earnings of 47 cents per share.

Excluding the cost of certain items, the company earned about $1.5 billion, or 52 cents per share, an increase of nearly 40 percent from the same quarter in 2005.

"The PC market, as we see it, is staying roughly steady," Hurd said. "We think the strength of the market will stay pretty level for a while. Were keeping our eye on the U.S. consumer first in that area; that will dictate our strategy going forward."

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In answer to a question about the HP job cuts announced July 19, 2005, Hurd acknowledged that about 9,200 of the approximately 15,000 employees to be displaced have already received their pink slips.

"We are staying on plan," Hurd said. "We will finish the [layoff] activity in Q4."

Hurd said that despite the strong Q3 results, the company can still perform better "across the board."

"Were encouraged, but this isnt a perfect picture yet, by any means," Hurd said. "The competition is tough, and we still have a lot of work to do to get even better."

Click here to read about HPs reorganization of its global operations.

Breaking the report down by HP divisions:

Personal Systems Group revenue grew 8 percent year over year to $6.9 billion, with unit shipments up 14 percent.

Imaging and Printing Group revenue grew 5 percent year over year to $6.2 billion. On a year-over-year basis, supplies revenue grew 9 percent, commercial hardware revenue grew 3 percent and consumer hardware revenue declined 3 percent.

Enterprise Storage and Servers reported revenue of $4.1 billion, up 3 percent year over year. On a year-over-year basis, industry-standard server revenue increased 6 percent, with blade revenue growth of 37 percent.

HP Services revenue increased 1 percent year over year to $3.9 billion.

Software revenue was $318 million, an increase of 30 percent year over year, with revenue in HP OpenView and HP OpenCall increasing 34 percent and 21 percent, respectively.

HP estimates that Q4 FY06 revenue will be approximately $24.1 billion, a company spokesperson said.

"This is no longer a turnaround discussion—we should all be talking about how long HP can maintain this momentum," Brian Babineau, an analyst with Enterprise Strategy Group, told eWEEK.

"We should no longer be talking about Hurds execution as leading a turnaround; he now has HP marching to the beat of a growth strategy drum. … HP is a growing at the expense of its competition (Dell), and that is a direct result of a renewed energy in the company. Hurd has not tweaked much of the product portfolio; he has provided a sense of optimism and level of confidence in employees, partners, channels, and customers," said Babineau, in Palo Alto, Calif.

HP also announced that its board of directors has approved repurchasing $6 billion shares of stock.

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