HP profits driven by laptop and blade sales

Hewlett-Packard's revenue and profit grew in its third quarter, largely due to strong sales outside the US, with laptop and blade-server sales leading the way.


Hewlett-Packard's revenue and profit grew in its third quarter, largely due to strong sales outside the US, with laptop and blade-server sales leading the way.

Revenue rose 10 percent to $28 billion (£15.6 billion) in the quarter, which ended 31 July, compared with the same quarter last year. Adjusted for the effects of currency, its revenue grew 5 percent from a year earlier.

The company's Personal Systems Group led with $10.3 billion, a 15 percent increase from a year earlier. While laptop revenue grew 26 percent, desktop sales rose just 6 percent. Another bright point for HP was the company's ESS (Enterprise Storage and Servers) division, where ESS blade revenue grew 66 percent and storage rose 16 percent.

As the US struggles with an economic downturn, HP's sales growth was strongest in Europe, the Middle East and Africa, followed by the Asia-Pacific region. Revenue rose most rapidly in the key BRIC developing markets -- Brazil, Russia, China and India -- up 24 percent from a year earlier. HP brought in 68 percent of its revenue from outside the US in the third quarter.

The company's profit rose 20 percent to $2.5 billion, or $0.80 per share. Not counting certain one-time items, the profit increased 20 percent to $2.7 billion, or $0.86 per share. That figure beat the consensus estimate of analysts polled by Thomson Financial, who had expected $0.83 per share. Revenue beat the analysts' expectations by less than $1 billion.

For the current quarter, HP forecast revenue between $30.2 billion and $30.3 billion. It expects earnings per share of $0.95 to $0.97, or $1.01 to $1.03 excluding special items. The company forecast quarterly revenue based on currency rates at the beginning of this month, but the earnings prediction is independent of currency, said Cathie Lesjak, executive vice president and chief financial officer.

"I am very pleased with our results," said Chairman, President and CEO Mark Hurd in a conference call after the announcement. Among the bright spots was renewed growth in the US, he said, though there is still a lot of economic uncertainty overall. One business that can benefit from hard times is services, with enterprises doing more outsourcing, Lesjak said. HP's services revenue rose 14 percent from a year earlier.

The company's acquisition of Electronic Data Systems, which will be a key part of its services strategy, will be completed by the end of this month, the company said. It had previously forecast that by the end of September. HP will hold an event in California on Sept. 15 to discuss the integration of the companies and the financial impact of the deal. Among other things, HP plans to help EDS automate some of its process and lower its costs to become more competitive, Hurd said.

The ultralight PC business is another bright spot for HP, which has found that the highly portable systems are creating a new market rather than cannibalizing other PC sales, Hurd said. They are being purchased as second computers and by people who haven't had computers before, he said. HP introduced three ruggedized ultralight PCs on Monday.

HP's Imaging and Printing Group saw revenue grow just 3 percent from a year earlier, to $7 billion. Revenue from both enterprise and consumer printer hardware fell, though the company brought in 11 percent more revenue from supplies.

HP is selectively targeting parts of this market, investing in shared wireless printers, where sales grew more than 100 percent, and in its high-end graphic arts printers. Both types lead to sales of more ink and supplies, which helps HP's revenue more in the long run than low-end laser printers where there is tighter price competition, the executives said.

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