updated 2/16/2005 7:10:33 PM ET 2005-02-17T00:10:33

A week after firing its top executive, Hewlett-Packard Co. reported quarterly earnings that were essentially flat, and its interim chief executive acknowledged, “There is work to be done.”

For the three months ended Jan. 31, H-P reported a profit of $943 million, or 32 cents per share, only 0.7 percent higher than the $936 million, or 30 cents per share, it earned in the first fiscal quarter of 2004.

Excluding special items, including at least $115 million to settle patent litigation with Intergraph Corp., H-P would have earned 37 cents per share, compared with 35 cents per share in the same period a year earlier.

Quarterly revenue was a record $21.5 billion, up 10 percent from $19.5 billion in the same quarter a year ago. But when adjusted for currency fluctuations around the world, revenue increased only 5 percent from a year ago, said interim CEO Robert Wayman.

H-P’s quarterly performance beat expectations of analysts polled by Thomson First Call, who forecast Palo Alto, Calif.-based H-P would earn 34 cents per share on sales of nearly $21 billion.

H-P shares closed Wednesday at $21.06, down 6 cents on the New York Stock Exchange. In extended trading, the shares gained 72 cents, or 3.4 percent, after the report was released.

Wednesday’s earnings came one week after H-P’s board ousted Chairman and Chief Executive Carly Fiorina for failing to slash costs and boost sales quickly enough.

In recent months, Fiorina — one of the country’s most powerful women executives — became the target of intensifying criticism for her ambitious diversification strategy. Through the 2002 acquisition of Compaq Computer Corp., she attempted to change H-P from a marginal company that focused on printers and ink into a Silicon Valley consulting and computing powerhouse.

Despite her efforts, ink and printers continue to drive revenue. The “imaging” division reported first-quarter sales of $12.9 billion, up 7 percent from the same period of 2004.

Given the sharply declining profit margins of printers and other low-end hardware, some Wall Street analysts have been suggesting shareholders might be better off if H-P were split into two or more pieces.

Most analysts polled Wednesday by Thomson First Call continued to rate H-P stock a “hold,” and share performance lags that of H-P’s fiercest rivals: Dell Inc., one of the world’s most efficient retailers, and IBM Corp., the leader in technology consulting services — a lucrative niche H-P is trying to penetrate.

Analysts said they remain skeptical about H-P’s prospects, regardless of the next CEO. The company is in a similar position to beleaguered retailer Kmart Holding Corp., whose profits are squeezed between high-end discounter Target Corp. and Wal-Mart Stores Inc., a model of retail efficiency.

“The strategy that H-P was running with Carly was trying to drive margins up in every business group, and that strategy has clearly failed,” said Martin Reynolds, vice president of technology research firm Gartner Inc. “The board needs to move on and come up with something other than a horizontal strategy.”

Wayman, who is also H-P’s chief financial officer, would not discuss succession — only quarterly results, which he called “solid.” He was particularly pleased with a record $3.8 billion in revenue from consulting contracts, an increase of 20 percent from the same quarter a year ago.

But he acknowledged that the company was under pressure to perform better. He said revenue for the upcoming quarter, which ends in April, would be at least $21.2 billion, similar to Wall Street’s expectations.

He also said the company would continue to slash expenses — possibly escalating a cost-cutting campaign that earned Fiorina the moniker “Chainsaw Carly” throughout Silicon Valley.

The company reduced research and development costs to $878 million in the first quarter from $889 million in the same quarter of 2004 — a risky move for any company in the fiercely competitive technology sector. “General and administrative” costs — which include expenses such as legal fees and consultants — swelled to $2.7 billion, up from $2.58 billion in the same period last year.

Wayman wouldn’t say how many people would be laid off this year at H-P, which ended 2004 with roughly 150,000 employees. But the company spent roughly $60 million in the fiscal first quarter on work force reduction plans, and it plans to spend as much as $140 million more in the current quarter.

“While we continue to make progress in growing our top line, there is work to be done to improve our profitability,” Wayman said. “As the board conducts a CEO search, our management team is focused on driving improved execution to serve our customers, strengthen our competitiveness and improve shareholder value.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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