HP Reports Jump in Profits Across Board

Updated: 'We're focused on balancing revenue gains, market-share gains with continued profitability,' CEO Carly Fiorina says, adding that the company is raising its second-half outlook.

Hewlett-Packard Co. saw quarterly revenues surpass the $20 billion mark for the first time while showing growth in all of its major divisions.

The Palo Alto, Calif., company reported Tuesday that revenue for the second quarter was $20.1 billion, a 12 percent increase over the same period last year. Operating profit for the quarter ended April 30 was tagged at $1.1 billion, a jump of 77 percent over the second quarter last year.

Chairwoman and CEO Carly Fiorina, in a conference call with analysts, said the company is so confident about the numbers that it is raising its second-half outlook, estimating that revenues will come in between $39.7 billion and $40.7 billion. Analyst estimates are at $39.7 billion, she said.

Fiorina painted the industry as highly competitive, with customers demanding value but at a lower price. HPs ProLiant systems, based on Intel Corp.s 32-bit Xeon chips, continue to be a focus for customers.

Robert Wayman, the companys chief financial officer, agreed, saying that such demand—while driving up revenues—puts pressure on the profit margins.

"Hardware continues to move to standards-based products with lower margins," Wayman said.

HP also aggressively priced its ProLiant systems and PCs to compete with rivals such as Dell Inc. and to improve market share.

In the last quarter, HP overcame Dell to become the top PC seller in the world. And HP officials have said that when they get their prices closer to Dells, the companys added value in such areas as management software and services becomes more attractive to customers.

/zimages/1/28571.gifClick here to read about Dell later reclaiming its PC crown.

"We continue to feel quite comfortable with the leverage we can get out of our enterprise business," Fiorina said. "We used pricing this quarter very explicitly to drive some share gains.

"Were focused on balancing revenue gains, market-share gains with continued profitability. It is an intensely competitive market out there, and when we can get the appropriate balance out there, were going to go for it."

The companys Technology Solutions Group—comprising storage, servers, software and services—had revenues of $7.7 billion, a jump of 11 percent.

The company showed a 15 percent growth in industry standard servers, and saw its high-end Superdome systems and Integrity line of Itanium-based servers grow revenue.

Storage revenue was down 1 percent from the second quarter last year to $897 million, but was up 7 percent from the previous quarter. Fiorina pointed out that HP rolled out 30 new storage products during the quarter and expects those to drive revenue growth.

In addition, software revenue jumped 23 percent, and services grew 15 percent to $3.5 billion.

Desktop and notebook revenue also grew, and HPs Imaging and Printing Group had record second-quarter revenues of $6.1 billion, up 11 percent over the same period last year.

Fiorina countered comments in the industry about Dells entry into the printer business being a threat to HPs dominance in the space.

"Theres been a lot of rhetoric," she said. "The reality is we continue to have record profits, record revenues and we continue to gain share."

Editors Note: This story was updated to include comments from Fiorina.

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