Cost Cutting, Layoffs Helps HP Earnings Report

Company surprises analysts

Hewlett-Packard Co. edged past Wall Street's forecast for the latest quarter, showing some resilience in troubled times, as strong laptop sales helped offset falling printer orders and weakness in some server lines.

Profit slipped 2 percent while revenue grew 19 percent, helped by a huge acquisition.

Electronic Data Systems Corp., which HP bought for $13.9 billion to challenge IBM Corp. for more technology-services contracts, added $3.9 billion in revenue.

Severe cost-cutting is helping HP meet its financial targets as it digests that deal. HP is cutting 24,600 jobs, nearly 8 percent of its 320,000-employee work force, in a major restructuring designed to save more than $1 billion a year.

Palo Alto-based HP managed to stack up some big gains despite the economic downturn.

The company sold $6.3 billion worth of laptops in the three months ended Oct. 31, a 21 percent increase from a year ago, at a time when customers are scaling back spending and suppliers are struggling. Intel Corp., the world's biggest maker of microprocessors, recently slashed $1 billion from its guidance for the October-December quarter because of falling demand for its chips.

HP did see significant weakness in other key areas, however. Revenue in two server categories declined and printer sales were off. Ink sales, a big reason the printer division contributes half of HP's entire operating profit, were a bright spot. Supplies revenue, including ink, rose 9 percent.

HP had announced preliminary results last week to reassure investors and shore up a sinking stock price. The full results were released Monday after the market closed.

HP's stock fell 35 cents to $35.35 in after-hours trading. It had closed up $1.06, or 3.1 percent, at $35.70 during the regular trading session.

The company's fiscal fourth quarter net income was $2.11 billion, or 84 cents per share, compared with $2.16 billion, or 81 cents per share, in the year-ago period. The per-share figure was higher in the latest period because there were fewer shares outstanding. HP bought back 45 million shares in the fourth quarter.

Excluding one-time costs, HP's profit was $1.03 per share, 2 cents per share higher than the average estimate of analysts polled by Thomson Reuters.

Sales were $33.6 billion, a 19 percent increase over last year's $28.3 billion. Excluding the effects of a weak dollar, revenue rose 16 percent. Analysts were expecting $33.3 billion.

HP repeated its earlier forecast for the current fiscal year, which includes a warning that further strengthening of the dollar is expected to hurt sales. Deals done in other currencies translate into fewer greenbacks when those currencies fall in value compared to the dollar.

In the first quarter, HP expects profit of 93 cents per share to 95 cents per share, excluding one-time charges, on sales of $32 billion to $32.5 billion. For the full 2009 fiscal year, HP expects profit of $3.88 per share to $4.03 per share, excluding items. Sales are projected to be $127.5 billion to $130 billion.


Copyright AP - Associated Press
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