HP bucks trend with strong first quarter results

HP late yesterday revealed strong earnings for its first fiscal quarter of 2008, reporting profits up 38 per cent year-on-year and prompting it to raise its forecasts.

In a conference call with analysts, HP's chairman, president and chief executive Mark Hurd said the business had suffered no knock-on affects by the recent turmoil in global financial markets.

"I will tell you in the US, at the end of the quarter, we saw a little bit more caution in the consumer segment than what we have seen in the past," he said. "But...on a global basis, we saw pretty steady growth across all of our businesses and segments."

Revenue for first quarter, which ended 31 January, was up 13 per cent from a year earlier and pro forma net income totalled $2.3 billion (£1.2 billion) or $0.86 per share, up from $1.8 billion (£923 million) or $0.65 per share, compared to the same period last year.

Although HP said the pro forma earnings figures excluded one-time items that slightly inflated results, its earnings per share beat analyst Thomson Financial's forecast of $0.81 per share. According to GAAP accounting principles, HP made $2.1 billion (£1.1 billion) profit or $0.80 per share.

Its laptop and desktop PC business, the HP Personal Systems Group, showed the most growth with revenue up 24 per cent year-on-year. Notebook sales had the fastest growth, up 37 per cent, while desktop sales climbed 15 per cent to help it maintain its lead over Dell in overall market that grew 13.4 per cent last year, according to Gartner.

Hurd also highlighted the fact that HP did 69 per cent of its revenue outside the US, with emerging markets driving significant growth. The Europe, Middle East and Africa region grew 15 per cent with Asia Pacific providing 22 per cent growth. But Hurd stressed this still only made up 31 per cent of revenue.

But the caution he said had affected the consumer market hit HP's imaging and printing group. Revenue grew four per cent to $7.3 billion (£3.7 billion) and its ink business was up six per cent, but printer unit sales had dropped by one per cent.

Its servers and storage group grew 9 per cent to $4.8 billion (£2.5 billion), driven by strong sales of blades and industry-standard servers, while service revenue climbed 11 per cent to $4.4 billion (£2.3 billion) and software sales climbed 11 per cent to $666 million (£342 million), HP said.

Hurd attributed the positive results to ongoing cost reductions, the addition of 2,000 new HP sales staff in the past year and a diverse product portfolio that will continue to be rationalised.

The markets responded favourably during after-hours trading after yesterday's announcement, adding five per cent the value of its share price.

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