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HP shreds 3Q estimates
August 16, 2000: 6:56 p.m. ET

Computer and printer maker beats the Street by 12 cents per share
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NEW YORK (CNNfn) - Hewlett-Packard on Wednesday said strong sales of electronic imaging and printing products helped lead the way to a fiscal third-quarter profit that beat Wall Street's expectations by 12 cents per share.

The company's board of directors also approved a 2-for-1 stock split payable on Oct. 27 to HP shareholders of record on Sept. 27.

The news sent HP (HWP: Research, Estimates) stock soaring in after-hours trade. Shares finished 7/16 higher at 111-7/16 at the 4:00 p.m. ET close of the New York Stock Exchange Wednesday. They shot up 9-5/8 to 120-5/8 in extended hours trade.

Excluding gains from investments and discontinued operations, HP said it earned 97 cents per share during the quarter ended July 31. Analysts polled by earnings tracker First Call had expected HP to turn a profit of 85 cents per share during the quarter.

Including one-time items, HP said its net profit was $1.05 billion, or $1.01 per share, compared with $853 million, or 81 cents per share, last year.

The company recorded net income of $1.05 billion during the quarter, up 22.6 percent from $853 million during the same period last year.

HP rang up sales of $11.8 billion, up 15 percent from $10.3 billion during last year's third quarter.

The most recent results represent the third consecutive quarter during which HP beat Wall Street's expectations, which executives attributed to a more aggressive and focused strategy it undertook a year ago.

graphic"Today's results demonstrate the tremendous progress we're making in all of our businesses around the world," said Carly Fiorina, HP's president and chief executive.

Sales were particularly robust in the company's electronic imaging and printing business as well as its home and desktop PC businesses, Fiorina said.

Sales at HP's imaging and printing systems segment, the company's largest business line, were up 15 percent year-over-year, the company said. Internet printing is driving our strategy and growth. That growth was led by sales of supplies such as ink and toner cartridges, followed by home printers and scanning devices.

HP's computing systems segment, which includes workstations, desktops, mobile computers, UNIX system and PC servers, as well as storage and software solutions, grew 12 percent in revenue year over year, the company said. Home PCs, notebooks and UNIX servers were the standouts there.

Revenue from HP's home PC business grew 62 percent, despite a relatively flat U.S. retail market. Notebook computer revenue grew 93 percent. UNIX server revenue was up 13 percent, the company said.

At the same time, HP reported that operating margins in the company computer systems business were 7.3 percent during the quarter, up from 3.7 percent from the preceding quarter.

"We are clearly demonstrating that we are not growing revenues at the expense of profitability," Fiorina said.

Meanwhile, revenue derived from the company's smallest business segment, IT services, rose 17 percent in revenue year over year.

On track for 15 percent revenue growth

Looking ahead, HP expects to post 15 percent revenue growth in the fourth quarter, according to Robert Wayman, the company's chief financial officer.

However, he said the company "remains cautious" about growth in monochrome laser printer and desktop PCs moving forward.

graphicDuring the quarter, HP said its commercial printing business continued to experience strong growth in color laser printers, up32 percent over the year-ago period. That was offset, however, by a shift in monochrome printers from workgroup to lower-priced personal office lasers.

On the PC front, while the second half of the year is typically the strongest amid stronger sales during the back-to-school and holiday shopping season, some industry observers see the market for PCs softening.

Last month, technology research firms Dataquest and International Data Corp. reported that growth in worldwide sales of personal computers slowed during the second quarter. They also suggested that the market for PCs, especially in the United States, may be reaching the point of saturation.

However, they also pointed out that corporate adoption of Microsoft's latest operating system, Windows 2000, could give a boost to PC shipments in the October through December time frame. Back to top


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