Associated Press
HP Meets Earnings Expectations
By MAY WONG
AP Technology Writer
Hewlett-Packard Co. Meets Earnings Expectations in Final Quarter Without Compaq Computer
SAN JOSE, Calif. (AP) -- In its last quarter of life without Compaq Computer Corp., Hewlett-Packard Co. (NYSE:HPQ - News) reported sharply higher earnings, in line with Wall Street's expectations even though its sales fell short.
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Now all eyes are on how HP executes the newly approved $18 billion marriage; apparently there will not be much of a honeymoon.
On top of consolidation challenges, company officials said corporate spending on technology remains depressed, and pricing pressures from competitors are still stiff.
HP refused to give guidance on the combined company when it reported second-quarter results late Tuesday. Company officials said more details will be disclosed at a security analyst meeting June 4.
"Until then, it's a wait-and-see mode," said J.P. Morgan analyst Daniel Kunstler. "They definitely have a tough task ahead of them to get this consolidation done."
For its second quarter ended April 30, HP reported net income of $252 million, or 13 cents per share, compared with $47 million, or 2 cents per share, in the year-ago quarter.
Revenue dropped 9 percent to $10.6 billion from $11.7 billion in the year-ago period.
Excluding acquisition-related and other one-time charges, HP said earnings were $498 million, or 25 cents per share, up from $336 million, or 17 cents per share, a year ago.
Analysts were expecting earnings excluding charges of 25 cents per share and revenue of $11.1 billion, according to Thomson Financial/First Call.
Aggressive cost cutting helped the company meet earnings targets, but revenue suffered largely because of the tough IT spending environment, the company said.
"While a muted recovery in the second half is still possible, we are not counting on a meaningful improvement in IT spending until 2003," Chief executive Carly Fiorina said.
Still, the quarter's relatively good results will allow HP to pay employee bonuses for the first time in 18 months, she said.
The results represent HP's final quarter prior to its merger with Compaq. After a contentious proxy battle led by former HP director Walter Hewlett, the merger became official a week ago.
Of the $260 million in one-time charges for the second quarter, $149 million was merger-related, said chief financial officer Bob Wayman. Merger expenses included $75 million on advertising and proxy solicitations for the drawn out battle, he said.
Most analysts are giving the new HP at least six months to begin delivering on its financial promises, including that the acquisition will lead to $2.5 billion in cost savings and a 12 percent increase in earnings. Fiorina has said she would be disappointed if HP doesn't exceed its forecasts.
HP's second-quarter results were released after the markets closed Tuesday. Shares of HP rose 52 cents, or nearly 3 percent, to end the regular session at $20.50 on the New York Stock Exchange. In after-hours trading, the shares slipped 90 cents.
For the first six months of fiscal 2002, HP reported net earnings of $736 million, or 38 cents per share, up from last year's figure of $188 million, or 10 cents a share. Sales for the half year were $15.9 billion, down from $17.8 billion last year. |
