Strong notebook computer sales and cost cutting helped drive a 30 percent increase in Hewlett-Packard Co.’s fiscal first-quarter earnings as the computer and printer company continued its turnaround under CEO Mark Hurd.
It was the latest sign that the Silicon Valley pioneer has overcome execution problems that led to a string of earnings disappointments under former CEO Carly Fiorina.
“Growth was balanced across most of our businesses and geographies, cash flow was strong and we were disciplined in controlling costs,” Hurd said. “While hard work remains ahead of us, our efforts are starting to show results.”
For the three months ended Jan. 31, HP earned $1.2 billion, or 42 cents per share, compared with a profit of $943 million, or 32 cents per share in the same period last year. Sales rose 6 percent, to $22.7 billion in the first quarter from $21.5 billion from the year-ago period.
Excluding one-time items, HP earned $1.39 billion, or 48 cents per share, compared with a profit of $1.08 billion, or 37 cents per share, in the first quarter of fiscal 2005.
On that basis, the results beat Wall Street expectations. Analysts were expecting Palo Alto-based HP to earn 44 cents per share on sales of $22.55 billion, according to a survey by Thomson Financial.
HP also said it expects second-quarter sales to be in the range of $22.4 billion to $22.6 billion, with per-share earnings of between 43 cents and 45 cents, or between 47 cents to 49 cents excluding items. Before the forecast, analysts were expecting a profit of 45 cents per share on sales of $22.6 billion.
Hurd, who replaced Fiorina last March, has implemented measures to cut costs and reorganize the sprawling technology company. He reversed course on some of Fiorina’s more controversial moves and, last July, announced plans to cut 14,500 jobs to bring HP’s costs more in line with its competition. The total job cuts grew to 15,300 late last year.
In the first quarter, HP’s head count dropped by 1,800 positions bringing the cumulative restructuring reduction to 6,500 to date, Chief Financial Officer Bob Wayman said. At the end of 2005, HP reported a total work force of 150,000.
Cindy Shaw, an analyst at Moors & Cabot, said HP is seeing benefits from its cost cutting as well as improvements in its overall performance. At the same time, the reorganization is still far from complete.
“They’re executing better,” she said. “The top line growth wasn’t stunning, but how do you get stunning top line growth with a $90 billion company?”
HP — whose offerings range from printers, cameras and PCs to corporate servers and services — was criticized under Fiorina for attempting to compete both against giant International Business Machines Corp. and super-efficient Dell Inc.
But lately, Dell has been stumbling. In the most recent quarter, reported in November, it missed analysts’ earnings targets by $300 million and its record sales of $13.9 billion fell short of its own forecast of between $14.1 billion and $14.5 billion. Dell reports its latest results Thursday after the market close.
HP said its Personal Systems Group, which includes PCs, saw year-over-year shipments increase 16 percent and sales jump 8 percent to $7.4 billion. Though desktop revenue improved 1 percent, notebooks saw a 26 percent jump in sales. The operating margin was the “highest in years,” Hurd said.
“This has been a relatively disciplined march by the people running the business ... to really get this business healthy,” he said. “This is the latest installment in that story.”
HP’s Imaging and Printing Group saw sales improve 8 percent to $6.5 billion. Within that, consumer hardware revenue increased 1 percent while commercial hardware grew 6 percent. Supplies — a big profit driver for the company — jumped 11 percent.
Its corporate server and storage business saw sales increase 5 percent to $4.2 billion, while the HP Services unit saw revenue decline 2 percent to $3.8 billion due to currency effects. HP’s software unit posted a 29 percent improvement in sales, to $304 million.
“This was an important quarter for HP,” Hurd said. “We made progress toward creating a stronger company that better serves its customers.”