HP Profit Falls but Beats Forecasts
{{#rendered}} {{/rendered}}Computer and printer maker Hewlett-Packard Co. on Wednesday reported sharply lower fiscal fourth-quarter profits as sales contracted in a tough economy, but the results soundly beat Wall Street forecasts as HP cut costs faster than expected.
Hewlett-Packard stood behind its planned $22 billion acquisition of Compaq Computer Corp., which has run into opposition from members of the founding Hewlett and Packard families as well as outside investors.
``We remain convinced this merger will occur,'' Chief Executive Carly Fiorina said during a conference call.
{{#rendered}} {{/rendered}}Hewlett-Packard shares jumped nearly 13 percent, gaining $2.57 to $22.80 in early trading on the New York Stock Exchange. Hewlett-Packard was the second most active issue behind Compaq, which was up $1.10, or 12.5 percent, at $9.90.
HP said it had cut operating costs 4 percent from the previous quarter and its well-known printing division had done particularly well, but it warned that tough times could continue in the wider economy, saying it was not counting on an economic recovery in 2002.
Hewlett-Packard earned $361 million, or 19 cents per share, from continuing operations, down from $841 million, or 41 cents per share, a year earlier.
{{#rendered}} {{/rendered}}Sales fell to $10.9 billion in the quarter ended Oct. 31, from $13.3 billion a year ago.
Wall Street had expected earnings of 8 cents per share, with estimates ranging from 7 cents to 14 cents, and sales of $9.9 billion, according to research firm Thomson Financial/First Call.
Hewlett-Packard posted strong revenues in October after a weak September, helping boost the company's earnings, Lehman Brothers analyst Dan Niles said.
{{#rendered}} {{/rendered}}``The comeback in October after a tough September drove better results and earnings per share,'' Niles said.
Net profit, including charges and one-time items, fell to $97 million, or 5 cents per share, from $922 million, or 45 cents per share, in the year-earlier quarter. The fourth-quarter results included a $282 million pre-tax restructuring charge.
``Results were driven by excellent execution in imaging and printing and good performance in services. While overall computing systems results remain weak, we saw improvement in certain segments, including storage and PCs,'' Fiorina said in a statement.
{{#rendered}} {{/rendered}}``We reduced our cost structure, improved our operational effectiveness and managed inventory aggressively,'' she said.
The computer division had a negative 4.7 percent operating margin, widening from 3.8 percent the previous quarter and 4.0 percent a year earlier, although HP said its Unix computer division remained profitable. Sales of computers fell 31 percent year on year.
The services division -- a key part of the planned merger with Compaq -- saw consulting hit by the weak economy as outsourcing revenue rose.
{{#rendered}} {{/rendered}}Last week, members of both the Hewlett and Packard families said that they planned to vote against the merger, which was announced on Sept. 4. That touched off speculation the deal won't get the needed shareholder approval. But Fiorina said that Hewlett-Packard executives have been meeting with and will continue to meet with the David and Lucile Packard Foundation, which owns more than 10 percent of Hewlett-Packard.
Hewlett-Packard said it still expected to quickly profit from the acquisition of Compaq. Compaq missed Wall Street expectations in its third quarter, reporting on Oct. 23 a loss due to weak technology spending and problems related to the Sept. 11 attacks, in part.
Hewlett-Packard said it expected fiscal first-quarter revenues to fall slightly from the fourth quarter. First-quarter margins and expenses would be flat compared with the fourth quarter, it said.
{{#rendered}} {{/rendered}}That is what some Wall Street analysts had expected the company to say.
``The outlook for the first quarter of fiscal 2002 is generally in line with our current estimate with the expectation of a slight decline in sequential revenue due to normal seasonal factors,'' Merrill Lynch analyst Tom Kraemer said in a research note.
The company also said that during the third quarter, revenues in the consumer sector fell 20 percent from the year-ago period and that revenues in the enterprise sector declined by 21 percent from the year-earlier period.
{{#rendered}} {{/rendered}}HP said it had made about 4,000 of 6,000 planned job cuts and would make the remaining cuts by the end of its first fiscal half.