HP 4Q results beat views; strong laptop sales help

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.

HP's CEO Mark Hurd, who has won over Wall Street by aggressively slashing HP's expenses, said the economy is getting "tougher and less predictable." He vowed that HP would emerge stronger because of the company's extensive and ongoing cost-cutting moves.

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 will help 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.

HP, which gets more than two-thirds of its sales from outside the U.S., managed to stack up some big gains in the latest quarter 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.

Hurd continues to wring more profit out of the business, in part, because of his focus on reducing expenses.

When the latest round of job cuts are finished, Hurd will have jettisoned nearly 40,000 jobs in two rounds of big layoffs since he took the job in 2005 after the rocky reign of Carly Fiorina. Other moves have included consolidating HP's 85 data centers into six large facilities and putting day-to-day expenses under a microscope.

Investors have been pleased with the changes, as HP's sales and stock price have soared under Hurd's watch.

HP rang up $118.4 billion in sales in its 2008 fiscal year, a 13 percent increase over last year. Profit was $8.3 billion, 15 percent higher than a year ago.

The company's market value topped $135 billion last December, more than double its value when Hurd took over. HP's stock price, though, has fallen since then on worries about the company's exposure to the financial crisis.

More than half of HP's revenue comes from the sale of personal computers, servers and storage machines, all of which have been under pressure because of tightened spending. Its pot-of-gold ink business is also under pressure from cheaper ink offered by competitors.

HP had announced preliminary results last week to reassure investors. 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, leaving HP with a market value of $87 billion.

HP'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.

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