HP Posts 30% Jump in Earnings

As Mark Hurd approached the end of his first year as chief executive of Hewlett-Packard Co., the tech giant said Wednesday that its fiscal first-quarter profit soared 30% on cost cutting and strong sales of notebook computers and printing supplies.

Shares of Palo Alto-based HP gained more than 3.5% after the close of regular trading.

“They’re doing phenomenally on the bottom line,” said Michael Cohen, director of research for Pacific American Securities. “This is a company ... that this year probably will have more than $90 billion in revenue, so there are good opportunities to squeeze more to the bottom line.”

HP’s profit was “definitely impressive,” said Shaw Wu, a computer analyst with American Technology Research, “although the revenue growth of 5.6% wasn’t exactly a barnburner.”

HP reported profit of $1.2 billion, or 42 cents a share, for the quarter ended Jan. 31, compared with earnings of $943 million, or 32 cents, a year earlier. Revenue was $22.7 billion.

Operating profit was 48 cents a share, beating analysts’ estimates of 44 cents.

“They’re blowing away everybody’s numbers on the bottom line,” Cohen said.

Hurd’s turnaround plan, which includes eliminating 14,500 jobs, “is taking effect,” Cohen said. “We’re reaping the fruit, and there are more fruit to be reaped.”

Hurd joined HP in March after then-CEO Carly Fiorina was ousted for failing to deliver consistent profitability in the wake of HP’s $18.9-billion acquisition of Compaq Computer Corp. in 2002. HP’s board repeatedly criticized Fiorina’s “execution” of company strategy at the time.

“Improving execution continues to be the largest driver of [earnings-per-share] growth, in our view,” Cindy Shaw, an analyst with Moors & Cabot, said in a note to investors before the earnings announcement.

HP said second-quarter revenue would be between $22.4 billion and $22.6 billion, with operating earnings of 47 to 49 cents a share. Analysts had expected 45 cents on revenue of $22.6 billion.

“When you’re in your first year as a new CEO, it’s a dream scenario for Mark Hurd to come in and beat the Street’s estimate, and then guide higher than that,” Cohen said.

HP shares lost 82 cents to close at $31.67 but gained $1.13 after hours following the earnings announcement.

HP’s imaging and printing group, long the company’s profit center, posted revenue of $6.5 billion, up 8% year-over-year. Operating profit was $973 million, or 14.9% of revenue.

Operating profit in the personal computer division doubled to $293 million, but with revenue up 8% to $7.4 billion, operating margins in the PC business were about 4%, well below those of printing and imaging. Notebook revenue grew 26%, well outpacing desktop growth of 1%, reflecting users’ shift to portable computing.

In an interview, Hurd said nothing in the last year had been easy. “We are very much in a sprint to get the company in shape so we can run a marathon,” he said. Key to that effort is “simplifying the mission and executing the strategies.”