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HP profit jumps 14 percent
Nov 23, 2009 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) --
Hewlett-Packard said today its quarterly profit rose 14 percent on the strength of lucrative service contracts, even as sales in its other business divisions showed a decline from the previous year.
HP said it earned $2.4 billion profit on $30.8 billion in revenue for the period that ended Oct. 31, which exceeded analysts' forecasts for the quarter. The company reported earnings per share of 99 cents.
The world's largest technology company had already released preliminary results earlier this month, when it announced plans to acquire computer networking company 3Com for $2.7 billion. In a report today, however, HP provided more details on how each of its business division performed.
While HP's total revenue fell 8 percent for the quarter, compared with a year earlier, the company said revenue from technology services -- including consulting and performing a variety of business and computing operations for its clients -- rose 8 percent to $8.9 billion.
HP said its services division contributed $1.4 billion in operating profit, or 16 percent of services revenue.
The company said revenue fell in each of its other major business segments, including printing, PCs and data center hardware such as servers and storage. Operating profit was flat or declined in each of those divisions.
PC revenue fell 12 percent, to $9.9 billion, even as the company posted an 8 percent increase in PC unit shipments. That's consistent
with a broader industry trend in which analysts say consumers are mostly buying lower-priced PC models.
The numbers show the results of CEO Mark Hurd's effort to aggressively cut costs while expanding into new business segments, even as the recession has dampened IT spending around the world.
Analysts say the 3Com acquisition will help HP compete head-to-head with networking giant Cisco Systems, but it's also part of a larger strategy: Rather than focus on one or two product segments, HP wants corporate and government customers to view the company as a "one-stop" shop for a complete range of computing hardware -- including servers, data storage and networking equipment -- along with business software and tech consulting services.
The strategy means HP is relying less on selling printers and ink supplies, which for many years were a major source of the company's profit. While printing is still an important business to HP, the company has said it expects to see more growth in other business segments.
HP is the world's biggest seller of personal computers. Its longtime rival in the PC business has not fared as well during the recession: Texas-based Dell said last week that its third-quarter profit fell 54 percent and revenue dropped 15 percent compared with a year earlier.
In a separate announcement, the Gartner research firm said today that the PC shipments rose faster than expected in the third quarter of 2009. That prompted Gartner to revise its forecast for the year, concluding that shipments will grow by 3 percent over 2008, instead of falling by as much as 2 percent.
But Gartner also warned that computer-makers are getting fewer dollars for the machines they sell: The firm said total revenue from PC sales will be $217 billion in 2009, or nearly 11 percent lower than in 2008. That's because consumers are increasingly turning to less expensive models, including laptops and netbooks that have fewer features but lower price tags.
The overall trend shows "customers have looked for "good enough" PCs at the cheapest price, and vendors have tried to spur market growth by catering to ever-lower price points," said Gartner research director George Shiffler.
Brandon Bailey may be reached at 408-920-5022.
To see more of the San Jose Mercury News, or to subscribe to the newspaper, go
to http://www.mercurynews.com. Copyright (c) 2009, San Jose Mercury News, Calif.
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