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    HP Profit Surges 29 percent

    Written by

    Clint Boulton
    Published August 16, 2007
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      HP shattered expectations for the third quarter, reporting today a profit hike of 29 percent to $1.78 billion, or 66 cents a share, thanks to strong sales of laptop computers.

      The No. 1 computer and PC maker easily bested its third quarter results from 2006, which were $1.38 billion on 48 cents a share.

      Q3 revenue rose 16 percent to $25.4 billion from $21.9 billion in the year-ago period, HP chairman and CEO Mark Hurd said on the Q3 earnings call. Analysts polled by Reuters Estimates had expected earnings per share of 66 cents and sales of $24.1 billion.

      “We had our strongest revenue growth since 2000,” Hurd said.

      Sales for HPs Personal Systems Group, or PSG, were $8.9 billion, mirroring the companys profit jump, at 29 percent growth from Q3 2006. Notebook revenue excelled, jumping 54 percent from the year-ago quarter, while revenue from desktop computers grew 12 percent.

      The Asia Pacific region led the way for PSG, with sales growing 22 percent to $4.6 billion on a year-over-year basis. Revenue in Europe, the Middle East and Africa grew 16 percent to $9.7 billion, and revenue for the Americas grew 14 percent to $11.1 billion.

      HPs Imaging and Printing Group, or IPG, normally a strength for HP, did not disappoint. IPG revenue grew 8 percent year over year to $6.8 billion.

      HPs Enterprise Storage and Servers, or ESS, group posted revenue of $4.5 billion, a 10-percent hike over the prior-year period. Industry-standard server sales grew 16 percent, with x86 blade revenue up 81 percent. Storage revenue grew 6 percent.

      HP saw the most growth in its Software Group, which grew 74 percent from the year-ago period to $554 million, led by strong growth from assets acquired in HPs purchase of Mercury Interactive.

      HP will seek to bolster this growth in the fourth quarter after acquiring IT automation management software maker Opsware, thin client Linux software specialist Neoware and application security vendor SPI Dynamics.

      PointerClick here to read more about HPs purchase of Opsware.

      In that vein, HP expects fourth quarter revenue to be between $27 billion to $27.2 billion on a diluted EPS (earnings per share) between 75 cents to 76 cents.

      Despite the success, Hurd said that HP will make incremental work force reductions to lower the companys cost structure going forward.

      “Im pleased with out overall results, but as a company we have plenty of work ahead,” Hurd said.

      In the last year, HP wrangled the PC market share lead from Dell with a share of 18 percent of the worldwide market, according to Gartner estimates released last month.

      Dell is battling back, pledging to depart from its bread-and-butter direct sales approach by selling computers in retail stores, including Wal-Mart.

      However, Dell Thursday said it will reduce more than four years worth of earnings by up to $150 million after an internal probe found the company misled its auditors and manipulated results to meet performance goals. Dell said its profit for the restatement period will be reduced by between $50 million and $150 million.

      Meanwhile, HP, whose shares leapt $1.10 to $47.15 after the bell, had its own bad news to contend with. CNet reporters Dawn Kawamoto, Stephen Shankland, and Thomas Krazit and Associated Press reporter Rachel Konrad sued HP for its role with the companys boardroom spying scandal.

      PointerClick here to read more about the HP boardroom scandal.

      /zimages/2/28571.gifCheck out eWEEK.coms for the latest news, views and analysis on servers, switches and networking protocols for the enterprise and small businesses.

      Clint Boulton
      Clint Boulton

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