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HP raises 2010 outlook, results beats Street view

HP raises 2010 outlook, results beats Street view
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First Published: Thu, Feb 18 2010. 09 12 AM IST
Updated: Thu, Feb 18 2010. 09 12 AM IST
San Francisco: Hewlett-Packard Co posted better-than-expected results on strong server and personal computer sales and a resurgence in its printing business, and the company raised its full-year outlook.
Shares of the world’s largest technology company by sales climbed 1.1% in after-hours trading on Wednesday.
For 2010, HP forecast earnings, excluding items, of $4.37 to $4.44 a share on revenue of $121.5 billion to $122.5 billion, up from its previous estimate of $4.25 to $4.35 a share on $118 billion to $119 billion.
Its profitable printing business rebounded from a slump during the recession, with sales rising 4% in the fiscal first quarter, and supplies revenue growing 1%.
Strength also came from HP’s server business, which is benefiting from an improved environment for corporate technology spending.
Collins Stewart analyst Louis Miscioscia said the hardware business outperformed his expectations.
“IT (information technology) is starting to come back. We’re seeing it right now in the numbers here. I think 2010 is going to be a good year for tech,” he said.
HP generates more than three-fifths of its revenue internationally, and the company said sales from fast-growing emerging countries Brazil, Russia, India and China leapt 41% from a year earlier.
Chief financial officer Cathie Lesjak also said strength in the quarter was led by the company’s hardware businesses: printers, servers and PCs. Personal computer revenue in China alone nearly doubled in the quarter, she added.
“We executed very well, especially in the hardware business,” Lesjak said in an interview. She said the technology upgrade cycle was beginning, and businesses are beginning to spend to upgrade aging equipment.
“I do think it’s getting underway,” she said.
Poised for the rebound?
HP reported net income of $2.3 billion, or 96 cents a share, in its fiscal first quarter ended Jan. 31, up from $1.9 billion, or 75 cents a share, in the year-ago period.
Excluding items, it earned $1.10 a share, beating the average Wall Street estimate of $1.06 a share, according to Thomson Reuters.
Net revenue rose 8% to $31.2 billion, versus the average analyst forecast of $30 billion.
Analysts say HP is well positioned to benefit from a surge in corporate spending on technology hardware later this year and next.
HP last year agreed to buy network equipment maker 3Com for $3 billion, aiming to expand its product portfolio and better compete with Cisco Systems Inc.
HP ranks No. 1 or 2 in a diverse array of technology segments, including PCs, services, printers and servers, following several high-profile buys spearheaded by CEO Mark Hurd including 3Com in 2009 and a $13 billion deal for Electronic Data Systems in 2008.
Hurd, who succeeded Carly Fiorina in 2005 and has earned a reputation on Wall Street as an aggressive cost-cutter, has kept the company focused on integrating its purchases and weaning away expenses.
Analysts estimate that more than 70% of the company’s operating profit comes from its printing and server divisions.
Personal computers make up roughly a third of HP’s sales, with services accounting for another 30%. The printing segment comprises about a fifth of HP’s revenue, but provides around 30% of its operating profit.
HP shares are up around 45% from a year ago, versus a roughly 40% rise for arch-rival International Business Machines Corp.
Shares of Palo Alto, California-based HP closed at $50.12 on the New York Stock Exchange and rose to $50.65 in extended trading.
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First Published: Thu, Feb 18 2010. 09 12 AM IST