February 25, 2003 5:40 p.m. EST
Hewlett-Packard Co. met Wall Street's earnings forecasts for fiscal first-quarter results, but missed revenue targets amid weakness in the U.S. market, and issued a cautious outlook.
The company, based in Palo Alto, Calif., reported late Tuesday its net income rose to $879 million, or 24 cents a share, for the period ending Jan. 31, from $484 million, or 25 cents a share, in the year-earlier period, when H-P had fewer shares outstanding. The year-earlier net income figure doesn't include results from Compaq Computer Corp., which was acquired by H-P in May.
H-P's results include a $156 million, or five cent a share, adjustment on an after-tax basis in amortization of purchased intangible assets and other acquisition-related items. Excluding items, H-P's earnings were $1.1 billion, or 29 cents a share, which was about in line with a Thomson First Call consensus estimate for earnings of 28 cents a share.
Hewlett-Packard Chief Executive Carly Fiorina said the company is "making good headway and continues to perform well," noting that the first quarter was its best overall profit performance since the Compaq merger.
Revenue was $17.9 billion, which missed a Thomson First Call estimate of $18.47 billion. Revenue weakness was confined to the U.S., Ms. Fiorina said, where weak commercial spending continued. Revenue was $11.4 billion in the year-earlier period, which excludes revenue from Compaq.
In the personal-systems segment, revenue increased 2% sequentially from the fourth quarter to $5.1 billion, with significant increases in consumer-PC and hand-held revenue. Enterprise-systems revenue fell 6% sequentially, while services revenue slipped 3% from the previous quarter amid a continued weak IT market. In the imaging and printing unit, revenue was flat, while financial-services revenue dropped 4% sequentially.
H-P ended the first quarter with $13.2 billion in cash and cash equivalents, short-term investments and certain long-term investments. Gross margin improved sequentially to 25.9% from 26.5%, reflecting continued improvement in the company's cost structures. Integration-related cost savings rose to $734 million from $482 million in the fourth quarter.
Looking ahead, Ms. Fiorina said the current climate is uncertain, which makes predictions difficult, a theme many of its competitors including International Business Machines Corp. and EMC Corp. mentioned in their most recent quarterly results. She reiterated the company's estimate for earnings of 27 cents a share in the fiscal second quarter. Wall Street currently expects the company to post second-quarter revenue of about $18 billion, according to Thomson First Call.
H-P has had a tough go of it, given the two-year slump in the computer industry and the hurdles it has had to overcome for its merger last year with Compaq.
H-P reported after the closing bell Tuesday. In 4 p.m. trading, shares were up 42 cents to $18.17 on the New York Stock Exchange.
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