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 16,960.57 -123.23 -0.72%
Nasdaq 4,449.56 -22.54 -0.50%
S&P 500 1,978.34 -9.64 -0.48%
Treasuries 2.47 -0.04 -1.59%
Data as of 6:24am ET
Company Price Change % Change
Bank of America Corp... 15.59 -0.03 -0.19%
Ford Motor Co 17.62 -0.22 -1.23%
Applied Materials In... 21.23 -0.52 -2.41%
Intel Corp 34.25 0.00 0.00%
General Motors Co 35.07 -0.67 -1.87%
Data as of Jul 25

Sections

The food processing company accused of mishandling meat at its Shanghai, China plant says it will suspend sales and recall all food processed there. More

Is the economy back on track after a weak first quarter or about to get blown away? Investors will find out when the curtain is drawn on jobs and GDP data. There's also a Federal Reserve meeting. More

Louisiana is now the top location for motion picture filming, supporting thousands of new jobs and small businesses. More

Americans with disabilities face huge financial hurdles and it starts early on, according to a recent report. More

Market indexes 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. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.