HP Revenues Grow 7% in Q4

Despite a scandal that led to the resignation of the board chairwoman, the company saw its profits climb 308 percent over last year's.

Helped by strong sales of printers, notebooks and servers, Hewlett-Packard reported that its fourth-quarter fiscal profits grew a whopping 308 percent compared with last year.

On Nov. 16, the Palo Alto, Calif., company reported net income of $1.7 billion or 60 cents per share for the quarter that ended Oct. 31. That represented a 308 percent increase from last year, when the company earned $416 million or 14 cents a share.

HP also reported revenue of $24.6 billion, a 7 percent increase from last year, when revenue stood at $22.9 billion.

Excluding one-time items, the company would have earned $1.9 billion or 68 cents a share. Prior to the Nov. 16 earnings call, Thomson Financials Thomson First Call had estimated profits of 64 cents a share and revenue of $24.1 billion.

Net revenue for 2006 was $91.7 billion, the company said.

Despite the good numbers, the last few months have been anything but problem-free for HP.

On Sept. 22, Patricia Dunn stepped down as chairwoman of the board of directors after weeks of negative press about the companys use of pretexting—a technique in which an investigator uses personal information to gain access to private records—to find the source of leaks that came from the companys boardroom.

/zimages/4/28571.gifClick here to read about why Dell did not report its quarterly results on the same day as HP.

Several other board members stepped down and the California attorney generals office eventually indicted Dunn and four other high-ranking HP executives with conspiracy and other charges. On Nov. 15, Dunn pleaded not guilty, according to Reuters.

The bad news did not seem to slow the company down, as all of its divisions saw good growth, and CEO Mark Hurd said HP was beginning to see dividends from its restructuring program. In recent weeks, reports by Gartner and IDC placed HP ahead of Dell in both the global and U.S. markets.

"This is our best quarter in a number of years," Hurd told reporters.

/zimages/4/28571.gifClick here to read more about how HP has been taking over the No. 1 PC maker slot from Dell.

Richard Shim, an analyst with IDC, said HP has indeed profited from its restructuring program. He added that the company has also focused more on profits and margin instead of market share, and the strategy has paid off.

"We have seen them continue to take advantage of a number of significant trends in the PC industry," Shim said.

HPs growth was fueled by a 10 percent growth in its Personal Systems Group, which includes the companys PC division. While desktop sales were flat, HP did report that its revenue for notebooks grew 24 percent.

The companys Imaging and Printing Group saw a 7 percent increase in profits and its revenue hit $7.3 billion. Commercial hardware revenue grew 8 percent, while the consumer side increased by 2 percent. Printer shipments increased 17 percent from last year.

On the server side, HP saw its blade revenue grow 38 percent from last years, while its traditional server business grew 9 percent.

The companys software division revenue grew by 14 percent, while its services division revenue increased by 5 percent.

In comments to reporters, Hurd said HP was still completing the restructuring program it announced in 2005, which included more than 14,000 layoffs. Hurd added that the company was more than halfway through the process.

The company is also preparing to merge its operations with Mercury Interactive. HP recently completed the $4.5 billion acquisition.

As for the pretexting scandal, Hurd did not give a timetable as to when the companys internal review would be complete. He did say that HP has been working on improving its image.

"We want to be a company that people look up to," Hurd said.

Hurd also mentioned that the company was waiting to see how the release of Microsofts new operating system, Windows Vista, would affect holiday sales. Vista is set to be launched to businesses Nov. 30 and to consumers early in 2007.

For first fiscal quarter of 2007, HP is predicting revenue of $24.1 billion to $24.3 billion and profits of 55 cents to 57 cents a share.

/zimages/4/28571.gifCheck out eWEEK.coms for the latest news in desktop and notebook computing.