Even in troubled times, Hewlett-Packard Co. has managed to stack up some impressive gains.
Laptop sales soared 21 percent to $6.3 billion in the latest quarter, despite warnings of a sharp slowdown in PC sales growth industrywide, slashed guidance from major suppliers like Intel Corp. and signs of momentum from competitor Dell Inc.
HP's total revenue rose 19 percent to $33.6 billion, helped by the mega-acquisition of Electronic Data Systems Corp., which added $3.9 billion in sales. Services revenue grew 10 percent even without the boost from EDS.
The better-than-expected results show how a diversity of business lines helps Palo Alto-based HP absorb weakness in specific parts of its business. Wall Street, however, remains wary of the company's prospects in a rocky economy. Some investors fear the damage to HP could be worse off than management expects in the coming year if the financial crisis worsens and HP's customers clamp down harder on spending.
HP shares fell 35 cents to $35.35 in after-hours trading Monday after it reported its full results for the fiscal fourth quarter, which ended in October. The stock had closed up $1.06, or 3.1 percent, at $35.70 during the regular trading session.
HP showed signs of weakness in some of its biggest divisions.
Profit slipped 2 percent to $2.11 billion, or 84 cents per share, compared with $2.16 billion, or 81 cents per share, in the year-ago period. The per-share figure was higher in the latest period because there were fewer shares outstanding. HP bought back 45 million shares in the fourth quarter.
Revenue in two server categories declined and printer sales were off. Ink sales, a big reason the printer division contributes half of HP's entire operating profit, were a bright spot. Supplies revenue, including ink, rose 9 percent.
HP's Chief Executive Mark Hurd, who has won over Wall Street by aggressively slashing HP's expenses, said the economy is getting "tougher and less predictable." He vowed that HP would emerge stronger because of the company's extensive and ongoing cost-cutting moves.
HP repeated its earlier forecast for the current fiscal year, which includes a warning that further strengthening of the dollar is expected to hurt sales. Deals done in other currencies translate into fewer greenbacks when those currencies fall in value compared to the dollar.
In the fiscal first quarter, HP expects profit of 93 cents per share to 95 cents per share, excluding one-time charges, on sales of $32 billion to $32.5 billion. For the full 2009 fiscal year, HP expects profit of $3.88 per share to $4.03 per share, excluding items. Sales are projected to be $127.5 billion to $130 billion.
Severe cost-cutting will help HP hit those targets.
HP is cutting 24,600 jobs, nearly 8 percent of its 320,000-employee work force, in a major restructuring designed to save more than $1 billion a year. Most of the cuts will come from EDS' ranks.
Hurd told analysts on a conference call that the company believes it can absorb a serious hit from the economy and still meet its profit goals.
"Certainly we have some resiliency in our capability to hit those numbers, and we wouldn't have given them out if we didn't think we could hit them," Hurd said on a conference call with analysts.
When the latest round of job cuts are finished, Hurd will have jettisoned nearly 40,000 jobs in two rounds of big layoffs since he took the job in 2005 after the troubled tenure of Carly Fiorina. Other moves have included consolidating HP's 85 data centers into six large facilities and putting day-to-day expenses under a microscope.
Investors have been pleased with the changes. HP's sales and stock price have soared under Hurd's watch.
HP rang up $118.4 billion in sales in its 2008 fiscal year, a 13 percent increase over last year. Profit was $8.3 billion, 15 percent higher than a year ago.
The company's market value topped $135 billion last December, more than double its value when Hurd took over. HP's stock price, though, has fallen since then on worries about the company's exposure to the financial crisis.
More than half of HP's revenue comes from the sale of personal computers, servers and storage machines, all of which have been under pressure because of tightened spending. Its pot-of-gold ink business is also under pressure from cheaper ink offered by competitors.
HP had announced preliminary results last week to reassure investors. The full results were released Monday after the market closed.
Excluding one-time costs, HP's profit in the latest period was $1.03 per share, 2 cents per share higher than the average estimate of analysts polled by Thomson Reuters.
Sales were $300 million higher than the average analyst estimate. Excluding the effects of a weak dollar, revenue rose 16 percent.
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