Hewlett-Packard’s Profit Forecast Exceeds Estimates

Hewlett-Packard Co., the world’s largest computer maker, forecast first-quarter profit that exceeded analysts’ estimates as corporations step up buying of personal computers, printers, servers and networking gear.

Excluding some costs, profit will be at least $1.28 a share in the quarter ending in January, Palo Alto, California-based HP said today in a statement. Sales will be $32.8 billion to $33 billion. Analysts had estimated $1.22 in earnings and $32.8 billion in revenue, according to data compiled by Bloomberg.

The company, led by new Chief Executive Officer Leo Apotheker, is benefiting from business customers replacing aging PCs and servers. HP is boosting research and development efforts to make its products and services more compelling and better use HP inventions across consumer and business products, Apotheker said today on a conference call with analysts.

“It’s not simply about spending more on R&D,” said Apotheker, who became CEO on Nov. 1. “Just as we help customers knock down their technology silos, we have the opportunity to knock down a few of our own.”

HP rose 3.2 percent to $44.62 in late trading after gaining 76 cents to $43.25 at 4 p.m. on the New York Stock Exchange. HP has lost about 7 percent since former CEO Mark Hurd resigned on Aug. 6.

Research and development costs rose 16 percent to $814 million in the fourth quarter from a year earlier, outpacing revenue growth.

“We expect this trend to continue,” Apotheker said.

Fourth Quarter

Fourth-quarter net income rose 5.2 percent to $2.54 billion, or $1.10 a share, from $2.41 billion, or 99 cents, a year earlier. Excluding some costs, earnings climbed to $1.33 a share in the period, which ended Oct. 31.

Sales rose 8.1 percent to $33.3 billion. Analysts had projected earnings of $1.27 a share and revenue of $32.8 billion. HP has topped analysts’ predictions in 22 of the past 23 quarters.

Revenue in the PC group rose 4.3 percent to $10.3 billion, while sales in the business storage and server business climbed 25 percent to $5.27 billion. Revenue from printers and printing supplies increased 8.4 percent to $7 billion.

“They clearly beat on the top and the bottom line,” said Shannon Cross, an analyst at Cross Research in Livingston, New Jersey. She recommends buying HP shares and doesn’t own any herself. “The strength in their numbers right now is what they’re seeing in the commercial segment” and growth in the networking business, she said.

Full Year

HP expects fiscal 2011 revenue of $132 billion to $133.5 billion. Excluding some acquisition costs and other expenses, earnings will be $5.16 to $5.26 a share. Analyst predicted $132.3 billion in revenue and $5.09 in earnings.

Apotheker also said today that the company will reinstitute salary raises in the coming fiscal year.

Global PC shipments rose 11 percent in the third quarter, a slowdown from 22 percent in the second quarter, according to IDC in Framingham, Massachusetts. HP is the No. 1 global PC supplier, ahead of Acer Inc. and Dell Inc.

HP named Apotheker to replace Hurd, who resigned after a company investigation found he had an improper personal relationship with an HP contractor. Hurd now serves as co- president at Oracle Corp.

Apotheker was ousted from German software maker SAP AG in February after less than nine months as CEO. Last month, he told analysts he would use software to make HP’s other computing products more attractive to customers and try to boost growth in emerging markets.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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