HP Q4 Profit Falls but Better Than Expected

SAN FRANCISCO – Hewlett-Packard Co. (HPQ), the No. 2 computer maker, Thursday posted quarterly earnings and a per-share profit forecast that both beat Wall Street estimates, boosting its shares by 6 percent.

While HP's net profit fell 62 percent, due in part to charges related to ongoing jobs cuts, the company's operating performance improved across a range of businesses.

The results came after disappointing earnings from rivals Dell Inc. (DELL) and Lexmark International Inc. (LXK) in recent weeks.

"The results look very, very positive pretty much across the board," said Richard Chu, an analyst at SG Cowen. "In the printer business, there's no question in my mind that throughout the last six to nine months, HP has really been flexing its muscles."

HP, also the world's largest printer maker, said net income for its fourth fiscal quarter ended Oct. 31 fell to $416 million, or 14 cents per share, from $1.09 billion, or 37 cents per share, in the year-ago period. Revenue rose to $22.9 billion from $21.4 billion.

Excluding items, HP said its per-share profit rose to 51 cents from 41 cents a year ago, ahead of the average Wall Street estimate of 46 cents, according to Reuters Estimates. Revenue was pegged at $22.8 billion.

HP is in the process of rolling through nearly 15,000 job cuts it announced in July to help cut annual costs by almost $2 billion. The company's per-share results, excluding items, in all four fiscal 2005 quarters have topped average Wall Street expectations as its businesses have improved.

"We've been doing a lot of things in the company at the same time and we've been doing that well," HP CEO Mark Hurd told reporters on a conference call to discuss the results.

For the current, first quarter, HP estimated earnings per share before items of 46 cents to 48 cents, excluding 3 cents to 4 cents of stock-based compensation expense. On a separate conference call with analysts, CFO Bob Wayman forecast first-quarter revenue of $22.3 billion to $22.6 billion.

Analysts expect Palo Alto, California-based HP to earn 44 cents per share, on average, before items, in the first quarter, on revenue of $22.57 billion.

"They guided very positively" for the first quarter, Chu said.

Chu said perhaps the brightest spot in the quarter was the company's server and storage business, whose revenue rose 10 percent to $4.5 billion from a year ago and its operating profit margin widened to 9.1 percent in the fourth quarter from 2.5 percent a year ago.

"There are still a lot of restructuring benefits ahead" for that business, Chu said.

So far this year, HP is the best performing stock in the Dow Jones Industrial Average, with a gain of some 35 percent, based on Wednesday's closing price. Over the same period, shares of IBM, also a Dow component, have declined some 12 percent. The index is down roughly 1 percent on the year.

In extended trade on Inet, the shares climbed $1.77 to $30.77 after closing at $29.00 on the New York Stock Exchange.