HP Triumphs While Dell Falters
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Hewlett-Packard’s sales and profit rise thanks to huge increases in its personal systems business.
November 16, 2006
redherring.com
Hewlett-Packard beat Wall Street forecasts Thursday thanks to its personal computing business—further underlining its dominance over Dell despite a bizarre scandal that saw HP confess to spying on board members and journalists.
For the quarter ending October 31, excluding certain adjustments, HP posted a profit of $2.2 billion, or $0.68 per share, compared to earnings of $0.52 the same quarter a year ago. That beat the consensus forecast of analysts surveyed by Thompson Financial, who expected HP to earn $0.64 per share.
The Palo Alto, California-based company posted sales of $24.6 billion, a 7 percent increase compared to $22.91 billion the same quarter last year. That beat analysts’ expectations of $24.12 billion.
The company said its personal systems group, which includes PCs, saw a year-to-year increase in profit of 68 percent. That improvement underscored a report last month from research firm IDC that said HP inched past Dell to become the world’s No. 1 PC vendor (see HP Blasts Past Dell In PCs).
Dell was also supposed to post its latest earnings Thursday. But late Wednesday the Round Rock, Texas-based company said it will delay announcing its quarterly results, due Thursday, and disclosed the U.S. Securities and Exchange Commission has stepped up its ongoing investigation of the company’s accounting practices from “informal” to “formal.”
HP shares were down $0.41 to $39.75 in after-hours trading, while Dell shares fell $0.10.
Dell blamed the delay on the "complexity" of S.E.C. and internal probes of the company's accounting. The company said it now expects to report the results at the end of the month, and that future earnings announcements will be moved back one week from each announcement date that has been scheduled.
The former high-flyer has been plagued with problems for several quarters. Analysts expect Dell will earn $0.24 per share, excluding extraordinary charges, on revenue of $14.44 billion, down sharply from earnings of $0.39 per share on $13.91 billion in the year-ago quarter, according to Thomson Financial.
Last quarter, HP also posted strong financials the same week as Round Rock, Texas-based Dell continued to disappoint (see Riding Hurd!, Dell: Profits Down, AMD In).
The trend marks a dramatic turnabout for the once woebegone Hewlett-Packard from Wall Street dog to Wall Street darling.
“Buy HPQ instead,” Citigroup analyst Richard Gardner wrote in a report on Dell, released Wednesday before Dell announced it would delay reporting results.
Nevertheless, Mr. Gardner was quick to point out that Dell is expected to improve its performance.
And Dell and HP are neck-and-neck in other ways. While much was made about HP purchasing gaming computer company VoodooPC, Dell had already bought boutique game machine makers Alienware (see Alienware Abducted By Dell, Voodoo Marks HP’s Halloween).
And unlike HP’s strategy of integrating the Calgary, Alberta-based Voodoo into its new gaming business, Dell has chosen to allow Miami, Florida-based Alienware to stay an independent subsidiary—which could keep notoriously elitist gaming fans from migrating in despair.
But that may not be enough to prevent Dell from its increasingly less-profitable business model.
“HP is one of the largest beneficiaries of Dell’s PC weakness,” Raymond James analyst Brian Alexander wrote in a research note. |
