HP Financials Surge On Laptop, Printing Strength
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Hewlett-Packard's fourth quarter revenue and profit blew away Wall Street expectations thanks to across the board strength but particular growth in the laptop business, its software market and the printer ink business.
On a conference call to discuss the fourth quarter and year-end figures, HP Chairman and CEO Mark Hurd said the board of director had authorized an additional $8 billion for stock buybacks, a sign the company believes its shares are undervalued. The company made $12 billion in buybacks and dividends in fiscal 2007.
HP's sales rose 15 percent over the same quarter last year to $28.29 billion, nearly $1 billion more than the $27.4 billion Wall Street was predicting. Net income rose 28 percent for the quarter to $2.16 billion, or 60 cents per share.
All of HP's divisions experienced double digit growth, with the highest percentage growth belonging to the HP Software division. Sales rose 100 percent in Q4 over the same quarter last year to $698 million and were up 79 percent on the year to $2.3 billion.
On the call, Hurd credited some of that to the acquisition of Mercury Interactive. "We are particularly pleased with the success of Mercury and the integration of the two companies is going well," he told the analysts on the call. Hurd said that HP is now the sixth largest software company in the world on a revenue basis.
The other strong spot was the Personal Systems Group, which rose 30 percent year-over-year in Q4 and 25 percent for the year. Much of that was chalked up to laptop sales, which jumped 49 percent over last year to $5.16 billion, making it the company's single biggest-selling category. Desktop computer sales rose 15 percent to $4.21 billion.
Much of that was driven by the BRIC countries Brazil, Russia, China and India, but also eastern Europe. BRIC grew by 37 percent this year and now accounts for nine percent of all revenues, according to Hurd. China was up more than 100 percent year over year.
But CFO Kathy Lesjak cautioned there would be some deceleration. "We still expect to increase market share," she added. "We've been cautious every quarter, not wanting to get ahead of where revenues come in."
For pure profit, HP is finding gold in that thar ink. The company derived 42 percent of its total operating profits in the fourth quarter from its Imaging and Printing Group, even though it's smaller than the Personal Systems Group on a dollar basis. The one laggard in IPG is the camera division, which HP is looking to outsource to a partner some time in 2008.
For the full fiscal year 2007, HP rang up $104.3 billion in sales, a 14 percent improvement over last year and the first time HP has cracked $100 billion in annual sales. Net income for the year was $7.26 billion, or $2.68 per share.
For Q1 of 2008, Lesjak projected revenues of $27.4 to $27.5 billion and cautioned "We don't want to set expectations that personal systems will grow at twice the market rate, nor would it be appropriate to build a cost structure on that rate." Part of the reason is she predicted component pricing would be less favorable in Q1, partly due to seasonality.