| | Hewlett-Packard Earnings Get Lift From Weak Dollar
By DAVID BANK
Staff Reporter of THE WALL STREET JOURNAL
Hewlett-Packard Co. delivered a mixed bag of results for its fiscal first quarter as strong performances in its personal- and business-computing groups were partially offset by lower profits in its technology consulting division.
Net income rose 30% on revenue boosted significantly by the weakening dollar. For the three months ended Jan. 31, the Palo Alto, Calif., technology company reported net income of $936 million, or 30 cents a share, up from $721 million, or 24 cents a share, in the year-earlier period.
Revenue rose 9%, to $19.5 billion from $17.9 billion. H-P said the declining value of the dollar helped, making its products less expensive for overseas buyers. Without the currency boost, H-P said revenue would have increased only 1%.
The effect of the weaker dollar was most pronounced in Europe, where revenue rose 17% fueled by strong sales of personal computers and business computers. Adjusted for currency, however, European revenue was essentially flat. Revenue in Japan rose 4% measured in dollars but fell 7% in constant currency.
H-P raised its revenue forecast for the current quarter by $100 million, saying it now expects revenue in the period ending April 30 of $19.2 billion to $19.6 billion. H-P left its profit forecast unchanged, at 34 cents a share, excluding certain expenses.
Chief Executive Carly Fiorina said she remains less optimistic than other industry executives in forecasting about business-technology spending, projecting an increase of 2% or less this year. "We know that customers have gotten more discriminating about how they spend their money, when they spend their money and with whom they spend their money," she said.
(Contrast this with what Rollins said recently [my emphasis])
For the just-completed quarter, the company reported profits in all of its five major divisions. Ms. Fiorina called the quarter "solid" and said it represented H-P's "most balanced profit performance" since its 2002 merger with Compaq Computer Corp.
Ms. Fiorina touted the results of H-P's personal-computer division, which is locked in a brutal price war with rival Dell Inc. H-P late last year reclaimed from Dell the No. 1 spot in world-wide PC sales, measured in units, though Dell continues to generate greater profits from its PC operations.
H-P's PC group reported a $62 million operating profit in the first quarter, up 88% from a year earlier, on a 20% increase in revenue to $6.2 billion. The profit was the group's largest since the Compaq merger. Ms. Fiorina said H-P's PC sales rose nearly twice as fast as Dell's for a second consecutive quarter. The results show that H-P can sustain its market-share momentum while maintaining profitability, she said.
H-P's enterprise-systems group, which makes server computers and data-storage devices for corporate customers, also reported improved results. That group swung to an operating profit of $108 million from a $92 million loss a year earlier. Revenue rose 5%, to $3.9 billion.
One trouble area appeared to be H-P's consulting arm, which competes with International Business Machines Corp. and others. Profits for the group fell 24% to $258 million, on a 6% increase in revenue to $3.2 billion. The company said it had strong growth in its managed-services business, which runs the technology arms of large corporations. Still, H-P said revenue in its consulting and technology-integration unit declined 10%, reflecting soft demand and intense price competition.
The bulk of H-P's profits came, as usual, from its powerhouse Imaging and Printing Group, which reported operating profits of $968 million on revenue of $5.9 billion, each up 6%.
H-P's overall results weren't a surprise, as the company last week released preliminary results to quell speculation that it had fallen short of forecasts.
H-P released its results after normal trading hours Thursday. At 4 p.m. in New York Stock Exchange composite trading, H-P shares were up 35 cents at $23.86. In after-hours trading, H-P shares fell to $23.35.
Write to David Bank at david.bank@wsj.com
Updated February 20, 2004 9:33 a.m. |
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