Hewlett Packard says quarterly results will top forecast

Hewlett Packard says quarterly results will top forecast
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First Published: Wed, May 09 2007. 11 16 AM IST
Updated: Wed, May 09 2007. 11 16 AM IST
San Francisco: Hewlett-Packard said on 8 May that its earnings for the quarter just ended would be higher than previously forecast, largely because of strong worldwide sales of personal computers. The announcement pushed the company's stock to its highest point in more than six years.
HP said it would announce that net income for its second quarter, which ended on 30 April, would be 64 cents to 65 cents a share on revenue of $25.5 billion.
The company, based in Palo Alto, Calif., had told analysts and investors when it announced first-quarter results in February that it had expected net income of 57 cents to 58 cents a share on revenue of about $24.5 billion.
HP intends to announce its complete financial results next Wednesday. But it was forced to make the unusual preliminary announcement because an employee inadvertently gave information about the financial results to what the company would describe only as an "outside third party." Executives were immediately advised and they decided to make a broad release to the public. It provided no other details.
The news sent the stock up 2.8% to $45.01, the highest closing price since November 2000.
Several Wall Street analysts said they were predicting continued strong growth for HP. Laura Conigliaro, an analyst with Goldman Sachs, raised her 12-month price target for HP's stock to $53 from $50. Bear Stearns, which had its price target at $59, raised it to $62 on Tuesday.
The company said that while its sharply higher earnings resulted in part from increased share repurchases in the quarter, PC sales played a large role.
IDC, a market analysis firm, said last month that Hewlett-Packard shipped 28.2% more computers worldwide in the first three months of the year than a year earlier while the market as a whole increased by 10.9%. HP's 19.1% of the world market makes it the world's No.1 PC maker. A report from Gartner, another market analysis firm, showed a similar result.
An increasing percentage of Hewlett-Packard's sales are for notebook PCs, which carry a higher profit margin.
Dell's worldwide shipments fell from 8% from a year earlier. HP is clearly taking sales away from Dell as well as from minor computer makers and those who sell unbranded products. Dell plans to announce its financial results on 31 May.
Looking into the current quarter, HP predicted net income of 59 cents to 61 cents a share and revenue of $23.7 billion to $23.9 billion.
The company hopes to capitalize on continued strong sales of its PCs in the current quarter, despite laggard growth of corporate technology spending in the US, because it has been revamping its desktop line and is announcing 13 new notebook PCs this week. One that it is displaying at a corporate event on Wednesday in Shanghai is a notebook with a 20-inch screen intended to serve as a portable entertainment center.
Most other models were aimed at business travelers. Some of the features include illumination of the keyboard for better visibility in low light, a built-in business card reader and faster broadband connections.
The notebook computers are important to HP's growth because that form of PC is the fastest growing not just in the US but worldwide. At the same time HP is trying to improve the profit margins on desktop PCs, a category showing almost no growth.
Hewlett-Packard's PC unit, run by Todd Bradley, a former chief operating officer at Palm, is making more highly styled desktops. They are all a glossy piano black with slots for media cards conveniently repositioned to the top of the machine. One whimsical feature on more expensive models is a small vase for a flower that fits onto the PC's monitor.
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First Published: Wed, May 09 2007. 11 16 AM IST
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