HP Profit Beats Raised Forecasts

Printer and computer maker Hewlett-Packard Co. reported on Wednesday first-quarter profit above expectations it raised last week, when it said consumers were buying PCs and printers.

The Palo Alto, California-based company, which said the results proved management's case it can successfully integrate takeover target Compaq Computer Corp. , posted a net profit of $484 million or 25 cents per diluted share, up from $141 million or 7 cents per share in the year-ago quarter.

Excluding one-time items and effects of accounting adjustments, HP posted a profit of $564 million or 29 cents per diluted share, compared with $812 million, or 41 cents per share in the year-ago quarter.

Sales fell to $11.4 billion from $12.4 billion in the year-ago quarter.

Analysts polled by research firm Thomson Financial/First Call had forecast operating earnings of 18-27 cents per share on sales of $11.1 billion. On Feb. 4, HP had said it would substantially beat the consensus at that time, which was 16 cents per share.

"Within this tough environment, we generated a meaningful increase in overall revenue versus last quarter based on strong sales in consumer and commercial PCs and digital imaging products, as well as exceptional growth in outsourcing," Chief Executive Carly Fiorina said in a statement.

"Profitability improved significantly in our imaging and printing, embedded and personal systems and IT services businesses, driving EPS above expectations."

The quarterly results were the second in a row to beat Wall Street expectations, and Fiorina said it proved management's case for taking on Compaq.

"Our execution these past two quarters demonstrates that we're ready to take this decisive step. We must take it now to lead the transformation and consolidation of our industry," she said.

Cautioning that the economic outlook was unclear and consumers might not continue buying strongly, HP forecast fiscal second-quarter revenue would be down "modestly" compared to the first and that gross margins and expenses would be approximately flat.

HP shares rose 1 percent to $20.98 on the New York Stock Exchange on Wednesday, ahead of the earnings announcement.

Hewlett-Packard stock is down about 10 percent from the close on Aug. 31, the last day of trade before it announced plans to merge with Compaq, while rival International Business Machines Corp. has gained about 8 percent since then.

HP says the merger with Compaq will create a high-end computer and services powerhouse, while opponents including founding family heir Walter Hewlett say the deal will bloat the company's personal computer business and sap resources better focused on high-end products.