HP’s Profits Surge; Markets Bounce Again

Hewlett-Packard  saw profits surge during in a solid quarterly earnings report, helping to cap another day of positive gains in the markets and setting Wall Street up for more bets that interest rates will remain steady for now.

For the quarter ended July 31, HP’s profit was $1.38 billion (48 cents per share), compared to $73 million (.03 cents per share) in the same time last year. However, accounting changes factored into the net income. The results (even with one-time accounting changes factored out) met analysts’ expectations of 47 cents per share

HP upped its fourth quarter and full-year expectations to $24.1 billion and full-year EPS (GAAP diluted) to be in the range of $2.14 to $2.16.

Revenue grew by 5 percent to $21.9 billion, or 6 percent over the same time last year if you factor in currency differences. Analysts were expecting between 4 percent and 6 percent. The company also announced a plan to buy back $6 billion worth of its stock.

Its major business units hit their marks. The personal systems group, which includes the PC unit, grew revenue by 8 percent to hit $6.9 billion.

Unit shipments were up by 14 percent and on a year-over-year basis, desktop revenue grew by 5 percent while notebook revenue climbed by 14 percent.

Another bread and butter division, imaging and printing, grew by 5 percent to hit $6.2 billion for the quarter. Printer unit shipments jumped by 15 percent, HP said. All-in-one printers jumped by 17 percent and laser printer shipments jumped by 70 percent year-over-year.

Sales in its enterprise storage and servers (ESS) division hit $4.1 billion, up 3 percent from the same quarter last year.

The second-largest PC maker’s results for its third fiscal quarter showed that the ongoing restructuring efforts under CEO Mark Hurd are paying off. HP has pledged to cut $1.9 billion in costs and is in the midst of laying off some 15,300, or about 10 percent of its workforce, as part of that restructuring.

Shares were headed up by 5.43 percent to $36.30 in after hours trading.

Investors had more reason to be optimistic that the Fed would ease off in increasing interest rates for now after the the Labor Department said the consumer price index rose by 0.4 percent in July. Take out energy and food costs, as is the tradition with the key data, and the increase was only 0.2 percent. The overall increase was among the lowest increases in months.

Investors, increasingly placing bets that the Fed will leave interest rates from rising for the near future, bid up major indexes for the second straight day.

The major indexes had another strong day, with the Nasdaq index gaining 1.63 percent to end the session at 2,149.54. The Dow Jones Industrial Average gained .86 points to end at 11,327.12. The S&P 500 index ended up .77 points on the day at 1,295.43.

Shares of CNET Networks  dipped by 2 cents to $8.79 during the regular trading day after it said it would request a hearing with the Nasdaq over a delayed quarterly report filing. CNET has previously disclosed that it is under investigation by the SEC for its stock options backdating practices and is in the midst of an internal audit of its past accounting for the options.

Stock option accounting hit the bottom line of SaaS player Salesforce.com , which lost $145 million for its second fiscal quarter, compared to a profit of $5 million (4 cents per share) during the same time last year.

But sales shot up by 64 percent to $118 million compared to $72 million in revenue the same time a year ago. Shares closed at $28.32 during the regular trading day but had shot up by about 13 percent to $31.99 in after hours trading.

Paul Shread is on vacation. Technical analysis returns next week.

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