HP beats gloom with earnings jump

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PC maker HP posted stronger-than-expected results and forecast full-year profit above market estimates, downplaying the market gloom that has hit most of its competitors.

HP's preliminary net profit in the fiscal fourth quarter that ended 31 October, was 84 (55p) cents per share, or $1.03 (67p) excluding items such as restructuring and acquisition charges. Analysts were looking for earnings per share of $1 (65p) excluding items.

Fourth-quarter revenue rose 19 per cent to $33.6 billion (£22.1 billion), or an increase of 16 per cent when adjusted for currency effects, compared with the average analyst estimate of $33.1 billion (£21.7 billion).

The positive numbers come after HP has lost about a third of its market value in the last two months on fears of a sharp slowdown in PC spending, which had increased after chip giant Intel shocked markets with a revenue warning last week.

"HP is gaining market share in an extremely strong competitive position. It’s got share gains, combined with very aggressive cost reduction," said Shannon Cross of Cross Research.

"It's very prudent management of their resources, and that's allowed it to put out numbers that are ahead of the Street even in this economic environment," she said.

The company forecast fiscal 2009 earnings excluding items of $3.88 to $4.03 per share, which beat the average market estimate of $3.86.

HP, which is scheduled to post full results next Monday, did not detail which parts of its hardware, software or services units were strong, saying only that it was benefiting from its global reach, diverse customer base and cost cuts.

It said in September that it would lay off 24,600 employees following its acquisition of services company EDS. HP also said on Monday it would extend its planned one-week manufacturing shutdown by an additional week to save costs.

Calyon Securities analyst Shebly Seyrafi said that while HP's figures were better than expected, the downside risk is for demand for PCs, especially notebooks, to slow.

"PC visibility is getting worse by the day and what they are seeing right now may not be true in a couple of months," he said. "So although what they are guiding for fiscal 2009 is positive relative to consensus, it still may be too high once the final numbers come in."

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