HP Third-Quarter Sales Top Estimates as PC Revenue Jumps
Hewlett-Packard Co. reported fiscal third-quarter sales that topped analysts’ estimates, fueled by improving personal-computer sales.
Profit excluding certain items in the period ended July 31 was 89 cents a share, with revenue rising 1.3 percent to $27.6 billion, the Palo Alto, California-based company said today in a statement. Analysts on average were estimating profit of 89 cents a share and sales of $27 billion, according to data compiled by Bloomberg.
The results -- with the first revenue growth after 11 consecutive quarters of declines -- give Chief Executive Officer Meg Whitman a boost as she works to turn around the world’s second-biggest PC maker. Since taking over in September 2011, she has focused on reducing costs and bringing new products to market like water-cooled servers and 3-D printers. Whitman, who was recently named chairman after activist investor Ralph Whitworth stepped down for health reasons, in May said she was paring as many as 16,000 more employees, on top of 34,000 already announced.
“Where they really stood out was on their PC side,” said Jeffrey Fidacaro, an analyst at Monness Crespi Hardt & Co., who has a buy rating on the stock. “The PC tailwind came in in this quarter, so I think we’ve got another quarter or two in that.”
Shares were largely unchanged in extended trading, after declining 1 percent to $35.12 at the close in New York. The stock is up 26 percent so far this year.
Corporate spending on PCs has also helped lift the results of other technology companies recently. Intel Corp. last month forecast revenue that exceeded analysts’ estimates for the current quarter, while Microsoft Corp. said it’s seeing signs of improvement in the PC market. Worldwide PC shipments slipped less than projected in the second quarter as businesses replaced older computers, researcher IDC said in July.
Whitman said in a conference call that there is more room for Hewlett-Packard to grow in PCs.
“We believe we can continue to gain share in PCs, despite the challenges in this market as it consolidates,” she said.
Hewlett-Packard’s net income for the quarter fell 29 percent to $985 million, or 52 cents a share, compared with $1.39 billion, or 71 cents, a year earlier. The company took a $649 million restructuring charge in the quarter.
For the current quarter, the company projected profit excluding items of $1.03 to $1.07, in line with analysts’ average estimate of $1.05, according to data compiled by Bloomberg.
Whitman has stabilized Hewlett-Packard and returned the company to profit over her tenure. She has cut jobs several times, including the latest round announced in May. The company’s workforce totaled 317,500 at the end of October.
“She’s done a really good job of stabilizing a business that was spiraling out of control,” said Jayson Noland, an analyst at Robert W. Baird & Co., who has the equivalent of a hold rating on the stock.
Sustained sales growth remains elusive. Hewlett-Packard competes with EMC Corp., Oracle Corp., Dell Inc. and others, all of which are facing young competitors that are fielding cheaper and simpler technologies. One of Silicon Valley’s oldest companies, Hewlett-Packard’s product range spans PCs to home printers to software, yet the company has fallen behind in mobile computing at a time when consumers have migrated to smartphones and tablets made by Apple Inc. and Samsung Electronics Co.
“The adversity of the turnaround is forming a much stronger company,” Whitman said in the conference call.
Within Hewlett-Packard’s portfolio of businesses, the personal-systems group, which sells PCs, saw revenue rise 12 percent to $8.65 billion from a year ago. Whitman said PCs sold strongly across the board in most regions, excluding China and Russia, though demand in China was good for commercial PCs.
Revenue growth in the company’s other divisions was weaker or showed declines, with some sales affected by “geopolitical instability in Eastern Europe,” the CEO said.
Sales in the company’s enterprise-computing group, which makes servers and other gear that is sold primarily to businesses, rose 1.9 percent to $6.89 billion from a year ago. Software revenue fell 5 percent to $959 million.
The company announced a water-cooled server in June that will let it chase sales in a part of the market where it hasn’t had products before.
Revenue in the enterprise-services unit, which provides consulting to corporations, decreased 6.4 percent to $5.59 billion. The printer business reported sales declined 3.8 percent to $5.59 billion.
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