Company WatchANALYSIS OF BREAKING NEWS
Hewlett Packard Co.:
Some Good News
February 19, 2008 - Hewlett Packard Co. (HPQ-NYSE) announced earnings. They were up 38% for the first quarter because notebooks and desktop PCs are still in high demand. But the really good news: Management raised its outlook for the rest of this year, one of the few companies during this quarter's announcements to do so.
HP CEO Mark Hurd said this on a conference call to analysts: "While I realize that macroeconomic uncertainties exist, it's important to note that we control many of the levers that drive our performance. We are therefore confident in our ability to meaningfully expand our earnings per share." However, Hurd also noted that the company "saw a little bit more caution in the consumer segment than what we have seen in the past" by the end of the quarter. So consumer demand is slowing, as would be expected given the price of gas, credit concerns, and a general slowdown in the economy.
Now the number 1 personal computer company, HP's earnings were 80 cents a share, up from 55 cents a share last year in the same quarter. Revenues soared 13% to $28.5 billion (that's only for one quarter), up from $25.1 billion last year. There were some extraordinary charges for the quarter, otherwise earnings would have been 86 cents a share. Analysts predicted 81 cents a share on sales of $27.6 billion.
This is good news for the tech sector. Cisco Systems stated unequivocally that demand was slowing in its earnings announcement for the quarter. With HP sounding a positive note, the industry must look better to investors. One reason for the heartening results: almost 70% of HP's sales come from abroad. In breaking down revenues, management said personal systems or PC sales were up 24% from a year ago to $10.8 billion. Total units shipped increased by 27%. Notebook sales gained 37% to $5.66 billion. Desktop revenues reached $4.4 billion, up 15%.
Still, the most profitable area for HP is its imaging and printing products which registered an operating profit of $1.2 billion, up only a skosh from $1.1 billion last year. Revenue increased by 4% to $7.3 billion. But HP's consumer printer hardware unit shipments were down 2% from the same quarter last year. Other divisions contributing: enterprise storage and servers. Combined, they made an operating profit of $673 million on $4.8 billion of sales. Blade server sales jumped by 81% from a year ago compared to the industry-standard server revenue growth of 11%. Storage sales increased by 10% over last year's first quarter. HP's software business almost tripled from last year same quarter to $51 million in profits on $666 million in sales. HP's services group had operational earnings of $489 million on $4.4 billion in revenues which were up 11% from the same quarter last year.
Management predicted second quarter earnings would be 77 cents to 78 cents a share, revenues between $27.7 billion to $27.9 billion. Excluding one-time items, earnings should be between 83 cents and 84 cents a share, according to management. Analysts had them down for 82 cents a share on $27.4 billion.
The stock was up 6% in after hours trading. It's great to see some good news for a specific company and for the tech sector. Let's hope there's more to come.
- Company Web site: www.hewlettpackard.com- Ted Allrich
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