HP hardware units return to black in Q4
Hewlett-Packard Co. (HP) on Wednesday reported 10 percent year-over-year revenue growth in its fourth fiscal quarter, driven by higher revenue in all its major product groups.
Managed services were a particularly bright spot during the quarter, HP said, growing 36 percent year over year. After running in the red both last quarter and in the year-earlier quarter, the company's Personal and Enterprise Systems Groups returned to operating profitability. Only HP's financing unit posted a year-over-year revenue decline.
Net revenue for the quarter, ended Oct. 31, was US$19.9 billion. Excluding acquisition-related and restructuring charges, the company had per-share earnings of $0.36, topping the $0.35 consensus estimate of analysts polled by Thomson First Call. Chief Financial Officer Bob Wayman said in a conference call with analysts that the fourth quarter would be the last in which HP excludes restructuring costs from its per-share earnings.
HP cut 2,400 positions last quarter but added 4,400 new ones in growing areas such as managed services, Wayman said. The company also expanded its "low-cost" offshore outsourcing operations, he said. HP's cuts came in all geographies and will continue in the coming year, executives said.
HP's 2003 revenue was $73.1 billion, up fractionally from the $72.3 billion total HP said it would have reported in 2003 had it and Compaq operated as a combined company for the full year.
HP's Imaging and Printing Group was its strongest unit during the quarter, posting revenue of $6.2 billion and operating profit of just over $1 billion. In contrast, the Personal Systems Group brought in nearly as much revenue, $6 billion, but had a profit of only $21 million.
While the company's HP Services unit was one of its most lucrative, turning a profit of $393 million on revenue of $3.2 billion, that market remains a fiercely competitive one, HP Chairman and Chief Executive Officer Carly Fiorina said during the conference call. Industry capacity in the segment continues to outpace customer demand, she said.
HP expects its revenue to drop sequentially next quarter, to between $19.1 billion and $19.5 billion, in line with what the company described as its usual seasonal patterns. Company expenses will increase next year as HP begins paying its executives bonuses that have been skipped in recent years, executives warned analysts, but HP hopes increasing demand will offset its rising costs.
Fiorina characterized IT buyers as "cautiously optimistic" in their planned spending. The consumer market is picking up more quickly, she said.
"Enterprises continue to be very tight with their purse strings," she said. "The enterprise environment is improving, but it is slight."