HP Shows the PC is Profitable, Again

While the news is good for HP, it also means that the company is putting more pressure on Dell as it tries to gain back market share.

Hewlett-Packard reported gains in both laptops and desktops in the second quarter, and CEO Mark Hurd said the companys PCs have received some help from the release of Microsofts Vista.

After releasing its second-quarter financial numbers this week, Hewlett-Packard showed why it remains the worlds PC market leader while delivering another blow to Dell as that company tries to gain back some of its lost market share.

For the period that ended April 30, HP reported May 16 that its notebook sales increased 45 percent, while desktops, which have faltered in recent years as consumers and enterprise customers have turned toward more mobile devices, increased 9 percent compared to the same time in 2006. Even HPs workstation revenues showed a 19 percent increased compared to last year.

Overall, the Palo Alto, Calif., companys PC profits climbed 24 percent from a year ago, while its operating profits hit $417 million this quarter. Its 30 percent increase in shipments also means the company is growing more than two times the average market rate.

All this comes at a time when recent reports by both Gartner and IDC found that HP remains the worlds top PC vendor.

While the news is good for HP, it also means that the company is putting more pressure on Dell as the Round Rock, Texas, company tries to gain back the market share and customers that HP has managed to take away during the last several quarters.

On May 16, Dell, which has found itself struggling both in terms of its products and external problems that include an investigation by the U.S. Securities and Exchange Commission and a lawsuit filed by the New York State Attorney Generals Office this week, reported that it would start its own channel model to help its laptops and desktops compete in the market.

/zimages/3/28571.gifClick here to read more about the HP garage garnering historic place status.

In a report following HPs results, analysts with Technology Business Research of Hampton, N.H., reported that the company will continue to take market share away from Dell and that its consumer offerings will lead the way.

"TBR believes that HP continued to wrestle market share away from rival Dell," the analysts wrote. "We believe that consumer notebook sales contributed a large portion of the [Personal Systems Groups] year-to-year revenue and unit shipment gains for [first calendar quarter of 2007]. However, we believe that HP PSG continues to move forward in all segments. As evidence, it reported a 9 [percent] year-to-year increase in desktop unit shipments in the quarter."

In a call with investors after Wednesdays numbers were released, CEO Mark Hurd said the company has benefited from the amount of research and development it has poured into its PCs, as well as improved design and features.

In addition, Hurd also noted that the release of Microsofts Windows Vista operating system has been good for the company. He added, however, that its too soon to tell how the new OS will benefit HPs PC sales in the long run.

/zimages/3/28571.gifClick here to read more Microsofts Vista sales.

When asked about Dells dive into the channel, Hurd played down this latest development, adding that HP would continue to offer better enterprise-class PCs, while fighting for shelf space within retail stores such as Best Buy and Circuit City.

"There are a lot of competitors out there and well continue to fight for that shelf space," Hurd said.

Overall, HPs earnings actually dropped about 7 percent from last year. In the second financial quarter that just ended, the company earned $1.78 billion, or 65 cents a share, compared to the $1.9 billion, or 66 cents a share, last year.

However, HPs results were watered down by a one-time expense of 5 cents a share. Also, last years results were aided by a 15-cents-a-share tax settlement.

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