HP Leans on PC Sales to Boost Q1

Hewlett-Packard Tuesday said it is holding its own thanks to strong holiday PC and inkjet printer sales as well as a few surprise areas.

The Palo Alto, Calif.-based computer and printer maker missed revenue estimates for its First Quarter of 2003 saying it made $17.9 billion in revenue and a GAAP operating profit of $879 million. The company took a pre-tax adjustment of $138 million of amortization of purchased intangible assets, and $86 million for other acquisition-related items.

The company also posted earnings per share of $0.29. Wall Street analysts had predicted $0.27 on $18.5 billion in revenue.

Even though the numbers were off, HP chairman and CEO Carly Fiorina said it was the best overall profit performance by the company since the merger.

“We made good progress on cost structures, achieved sequential market share gains in each of our businesses, and continued to improve gross margins,” Fiorina said in a statement.

The company said its shortfalls were largely confined to the U.S. market, as weak commercial spending continued. Outside the U.S., HP said its revenues improved 3 percent over last year with strong performance in Europe and Asia-Pacific.

“Today’s world is full of uncertainty and predictions are difficult. We’re staying focused on what we can control — maximizing our operating model leverage, delivering the best possible products and services, accelerating market share gains, staying on the offense and investing in growth,” Fiorina said.

Based on current conditions, Fiorina said she was “comfortable affirming analyst consensus estimates of $0.27 for the second quarter.”

Outside of its bread-and-butter $5.6 billion printing division, HP said it saw strong growth in its $5.1 billion Personal Systems group especially with its Media Center PC, Tablet PC and iPAQ lineup. The company said it hit the 3 million unit sales mark for handhelds making it one of the top four vendors.

The Personal Systems group was also aided by customer deals including SBC’s selection of HP to deploy 14,000 desktops, 4,600 notebooks and 400 technical workstations supported by an HP service warranty. Then there was that a three-year, $100 million contract with the Internal Revenue Service to provide more than 30,000 desktop and notebook PCs.

While the company’s Enterprise Systems division lost money, HP said the bleeding has slowed. The division recorded $3.7 billion in revenues, down 6 percent from previous quarters. Fiorina said the loses were due to a weak UNIX market and a tough quarter for NonStop servers in the telecommunications and finance industries.

On the plus side, HP said it shipped more ProLiant and Superdome servers than ever before. The company said it is currently shipping thousands of Itanium 2-based systems and launched new AlphaServers, new ProLiant servers and 2- and 4-way blade servers.

Compared to its chief rivals IBM and Sun Microsystems , Gartner Dataquest said HP grew its No. 1 share of overall server shipments worldwide to 30 percent, and grew server revenue sequentially.

Based on those numbers, HP said it displaced Sun as the No. 1 UNIX vendor worldwide. The company also said it increased its share of Linux server revenue to 32.8 percent worldwide (excluding mainframes), up 4.2 percent from previous reports. HP said it also seeing sequential growth in its external RAID, storage software and SAN units.

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