HP profit gains on cost cuts, cheaper components
Hewlett-Packard reported on Thursday higher quarterly profit as it benefited from cost cuts, lower computer component prices, and rising margins across its business.
Shares of the world's largest personal-computer maker, already up 12 percent so far in 2007, rose 3 percent in after-hours trading following the earnings report.
Net income in its fiscal third quarter rose to $1.78 billion, or 66 cents per share, from $1.38 billion, or 48 cents per share, a year earlier. Excluding items, HP earnings came in at 71 cents per share.
Revenue in the quarter rose to $25.4 billion from $21.9 billion a year earlier.
Analysts, on average, expected earnings per share before certain items of 66 cents and revenue of $24.1 billion, according to Reuters Estimates.
HP has benefited along with competitors including Dell and Apple from sharp price declines for computer memory, disk drives and microprocessors this year amid a supply glut, analysts say. HP also has cut 15,000 jobs in the past two years, and is consolidating data centers and selling real estate to cut costs.
Shares of HP trade at 17 times expected 2007 earnings per share, compared with 16 for IBM and Dell's 20.
HP in May had forecast third-quarter net income of 60 cents to 61 cents per share and profit before certain items, mainly amortization of purchased intangible assets, of 64 cents to 65 cents per share. It expected third-quarter revenue of about $23.7 billion to $23.9 billion.
Third-quarter revenue in HP's personal systems group, which includes PCs, rose 29 percent to $8.9 billion, while operating profit was $519 million, or 5.8 percent of revenue compared with 4.0 percent a year earlier.
In imaging and printing, one of HP's biggest profit drivers, revenue rose 8 percent to $6.8 billion. The unit's operating profit was $981 million, or 14.5 percent of revenue, up from 14.2 percent a year ago.
Enterprise storage and server revenue climbed 10 percent to $4.5 billion and operating profit was $464 million, or 10.2 percent of revenue, up from 7.2 percent a year earlier.
HP's services revenue climbed 8 percent to $4.2 billion and operating profit in the business was $430 million, or 10.3 percent of revenue, up from 9.4 percent.
In software, revenue rose 74 percent to $554 million and operating profit was $81 million, helped by last year's $4.9 billion acquisition of Mercury Interactive.
HP, based in Palo Alto, California, said in July it planned to buy software company Opsware for $1.6 billion to bolster its business of helping corporate customers manage computer systems.
HP shares had closed 0.2 percent lower at $46.05 in regular-session trading on the New York Stock Exchange.
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