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HP 3Q beats estimates
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August 16, 1999: 6:14 p.m. ET
Tech firm's profit rises 37 percent amid strong PC sales; spin-off set
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NEW YORK (CNNfn) - Hewlett-Packard Co. reported a 37-percent rise in its third-quarter profit, which came in well ahead of Wall Street estimates before charges associated with a broad restructuring plan cut into its earnings.
The Palo Alto, Calif.-based firm recorded earnings of $853 million, or 85 cents a share. Analysts polled by First Call expected Hewlett-Packard (HWP) to earn 80 cents a share in the quarter. Revenue grew 11 percent to $12.2 billion. HP easily outpaced its year-ago operating performance, when it posted a profit of $621 million, or 58 cents a share, on $11 billion in revenue.
"We've stayed focused on profitable growth, and we're beginning to see the results of our efforts to convert orders into stronger revenue growth," said Lewis E. Platt, HP chairman. "Profit results were even better. A number of businesses improved their profitability, with overall profitability exceeding our expectations."
Philip Rueppel, technology analyst at Deutsche Bank Alex.Brown, said HP's revenue growth was about $100 million lighter than analysts had forecast. Nonetheless, he characterized HP's performance as "generally strong."
Robert Wayman, HP chief financial officer, said the company expects 10 percent to 13 percent revenue growth in the fourth quarter. Including $60 million in charges associated with a previously announced restructuring plan, HP recorded a profit of 81 cents a share, which still beat analysts' estimates.
Wayman said HP expects to take approximately $160 million in separation costs in the fourth quarter. Earlier this year, HP announced plans to split into two publicly traded companies: one that focuses on its test and measurement businesses and one that concentrates on its computing and imaging businesses. Earlier Monday, HP's Agilent Technologies test-and-measurement unit filed for an initial public offering.
 HP shares have soared this year as its profits continue to rise
Shares of HP, a Dow component, rose 4-5/16 to close at 110-5/16 prior to the earnings announcement. Its stock fell to 108 in after-hours trade on the Instinet trading system.
Because of investors' heavy buying of HP shares Monday, Rueppel said the company's stock could come under pressure Tuesday despite HP's strong earnings performance.
HP attributed much of its profit rise to an continued growth in its computer products business, citing record quarterly shipments of PCs, which grew 12 percent to $10.3 billion in the quarter. The company also said it achieved double-digit revenue growth in its printing and imaging business, driven by strong sales of color printers and scanners. "Their printer business is doing better than expected given where they are in the product cycle," said Rueppel, who rates HP a "buy." "We expect that segment to be even stronger into the second half of the year."
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Hewlett-Packard
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