Overseas, Laptops Key to HP’s Profit

Tech bellwether and PC manufacturing leader HP beat Wall Street
expectations for its most recent quarter, continuing the trend of U.S.-based
technology giants posting growth on strength in emerging foreign markets.

In its fiscal third-quarter 2008 earnings, the company posted $28 billion in revenues, up 10 percent compared to last year. On that
performance, the company saw net income rise by 20 percent to $2.5 billion, or
$0.80 per share, compared to the same period last year.

Wall Street had anticipated profits of $0.84 per share before charges, on
revenue of $27.43 billion, according to Reuters Estimates.

Charges include $161 million of adjustments after taxes, related to
amortization, HP said.

“By accelerating our enterprise growth and executing well across the
portfolio, HP delivered a strong third-quarter performance,” said Mark Hurd,
HP’s chairman and CEO. “Our global position, broad product and services
offerings and incremental cost-saving opportunities make us confident that
we’ll continue to meaningfully expand earnings.”

The company gave fiscal fourth-quarter earnings guidance of $0.95 to
$0.97 per share, and $1.01 to $1.03 per share after taxes — slightly higher
than Wall Street expectations, according to Reuters Estimates. HP also said
revenues would total about $30.2 billion to $30.3 billion, a penny behind

However, those results won’t include the impact of HP’s pending acquisition of EDS to strengthen its
services unit. HP expects that transaction to close during fourth quarter.

Looking abroad

HP saw continued gains in revenue from the Americas — with revenue
increasing 4 percent from last year, to $11.6 billion. But as with many of
the tech industry’s leaders, the lion’s share of its revenue growth came
from non-U.S., and especially emerging markets, as the economy cools at

Those trends contributed to 14 percent growth in the Asia Pacific region
— where HP posted $5.2 billion in revenue — and 16 percent growth in the
combined Europe, the Middle East and Africa region, where it recorded
revenues of $11.2 billion. Taking currency fluctuations out of the equation
throw HP’s performance in the Americas into even sharper relief: revenue in
Europe, the Middle East and Africa grew 5 percent, and revenue in Asia
Pacific grew 8 percent. Meanwhile, by those calculations, revenue in the
Americas grew only 3 percent.

HP said that non-U.S. revenue amounted to 68 percent of its total take,
with revenue in the fast-growing “BRIC” region (Brazil, Russia, India and
China) exploding 24 percent over the prior year. BRIC markets delivered 10
of HP’s total revenue, it added.

Strength in notebooks and servers

PC and notebook sales remained brisk, with revenues in HP’s Personal
Systems Group increasing 15 percent from last year, totaling $10.3 billion.
Continued strength in notebook drove a large portion of that performance,
with the category seeing 26 percent growth in revenue compared to a year
ago. Desktop revenue, on the other hand, grew far more slowly at 6 percent.
Overall unit shipments rose 20 percent during the same period.

HP’s imaging and printing group saw anemic growth from last year, with
revenues increasing only 3 percent to $7 billion. Revenue from the
division’s supplies unit grew 11 percent, which partially offset slowing
revenue from commercial and consumer hardware — units that posted 5 percent
and 14 percent declines in revenue, respectively, compared to last year.

The company also said printer shipments dropped 2 percent from last year.

On the enterprise front, HP said it raked in $4.7 billion in its storage
and servers group, an increase of 5 percent from last year — growth the
company attributed in large part to blades, which saw 66 percent higher
revenues. Mid- and low-end storage sales also proved robust, contributing
to 16 revenue growth in storage from a year ago.

Revenue in HP’s services group, HPS, increased 14 percent from last year,
to $4.8 billion. Technology services and consulting saw 13 growth in revenue
each, while integration and outsourcing services posted revenue growth of 18
percent compared to last year.

Software revenues grew 29 percent versus the third quarter of last year,
topping out at $781 million. HP’s business technology optimization software
group contributed the bulk of the gain, posting 32 percent growth in

HP’s financial services unit also saw brisk gains of 17 percent from last
year, totaling $680 million.

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