PC sales spike drives HP profit growth

By Chavon Sutton, staff reporter


NEW YORK (CNNMoney.com) -- Hewlett-Packard, the world's largest technology company, used its heft to push sales and income higher last quarter as both consumers and businesses upped their spending on HP's computers and printers.

HP (HPQ, Fortune 500)'s net income rose 28% in its second fiscal quarter, ended April 30, to $2.2 billion, or 91 cents per share. That's up from $1.7 billion a year ago.

The results included 18 cents per share for charges related to recent acquisitions. Without the charges, HP (HPQ, Fortune 500) said it earned $1.09 a share.

Analysts polled by Thomson Reuters, whose estimates typically exclude one-time charges, expected $1.05 per share.

Sales rose 13% to $30.8 billion, from $27.4 billion during the same period last year, beating analysts' forecast of $29.8 billion. The big growth came in HP's PC division, where sales rose 21% to nearly $10 billion.

"We've built the best portfolio in the industry, and our customers are responding," Mark Hurd, HP's chairman and chief executive officer, said in a prepared statement.

The company boosted its full-year outlook for the second straight quarter. HP expects earnings per share in the $4.45 to $4.50 range, up from its previous forecast of $4.37 to $4.44. It also lifted its sales forecast.

The raised outlook came as a surprise to analysts, who expected the company to temper its guidance based on pressures from currency fluctuations and economic weakness in Europe, where HP does around a third of its sales.

"Everyone expected them to guide down their revenue outlook, but you haven't seen that in these numbers," said Jane Snorek, a technology analyst at First American Fund Advisors.

In a conference call following the earnings release, HP chief financial officer Cathie Lesjak told analysts that the effects on HP of a weak euro would be "much more muted than you might believe," and have been accounted for in the company's forecast.

Broad-based growth

Consumer and commercial spending on computers and printers, which comprise about half of HP's sales, continues to climb. The company saw a 20% rise in year-over-year unit sales for its PCs and a 9% increase in printer shipments.

HP's sales rose in every unit except software, where revenue dipped slightly compared to last year. But analysts were generally pleased with the results, and HP's stock rose 2.5% in after-market trading.

"Strength was pretty broad-based. They're obviously landing big deals," Snorek said. "This tells me that business activity is picking up."

In recent months, HP has been on a buying spree. The company in November announced plans to buy 3Com (COMS), a networking gear manufacturer, for $2.7 billion. The deal closed April 12.

In April, HP announced that it would buy troubled smart phone maker Palm for $1.2 billion. But Mark Hurd was quick to cast the move as "not a smart phone play" -- what HP is really after is Palm's intellectual property, Hurd told analysts on Tuesday's call. Owning Palm will better position HP to take advantage of opportunities in the mobile technology market, he said.

The industry is waiting eagerly to see what HP will do with its new prize. With Apple's iPad blazing a trail through the tablet market, analysts expect a counter-move from HP. Will HP scrap its moribund current tablet, which uses the Microsoft Windows 7 operating system, for another that features Palm's technology?

Hurd offered few hints. HP will be a "participant" in the tablet market, but its "extremely important" relationship with Microsoft won't be threatened, he said.

HP's main rival in the personal computer market, Dell (DELL, Fortune 500), reports its quarterly earnings Thursday.

Correction: An earlier version of this story misstated HP's exclusions in its earnings per share figure. CNNMoney.com regrets the error.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,810.06 91.06 0.51%
Nasdaq 4,712.97 11.10 0.24%
S&P 500 2,063.50 10.75 0.52%
Treasuries 2.32 -0.02 -0.86%
Data as of Nov 23
Company Price Change % Change
Bank of America Corp... 17.12 0.12 0.71%
Kinder Morgan Inc 39.75 -0.17 -0.43%
Apple Inc 116.47 0.16 0.14%
Intel Corp 35.59 -0.36 -1.00%
Microsoft Corp 47.98 -0.72 -1.48%
Data as of Nov 21

Sections

This arrangement, announced Friday, illustrates how the lines have blurred between traditional TV networks and newfangled options like Netflix. More

The Obama administration is touting that its immigration action will boost wages. But the hike amounts to only $170 a year by 2024. More

Regin is malware has been lurking in computers for as long as six years, according to Symantec. But experts don't know much about where it is from, what it does and who has been targeted. More

Obama doesn't have the authority to create a startup visa, but part of his reform announcement could include a workaround for entrepreneurs: 'parole status.' More

Nearly half of all Americans say there's a chance they'll have to work during a holiday between Thanksgiving and New Year's, according to a new poll. And one in four say they'll have to work whether they want to or not. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.