2004 recovery steady not “explosive”, warns HP

20 Feb 2004

Computer hardware and software maker HP is seeing a steady recovery in information technology spending but warned that corporate spending on IT in 2004 is not going to be “explosive.” In its first quarter results HP reported a 30pc increase in earnings although analysts remained cautious about the company’s ability to outperform other IT giants like Dell and IBM.

For the three months ended 31 January, HP reported a profit of US$936m, or 31 cents per share, compared with US$721m, or 24 cents per share last year. HP earned US$1.08bn, or 35 cents per share. That compared with US$877m, or 29 cents per share, last year. First-quarter 2004 revenue was US$19.51bn, up 9.2pc from US$17.88bn in the first quarter of 2003.

Looking out to the remainder of the year, HP said it expects to report second-quarter revenue of US$19.2bn to US$19.6bn and earnings of about 34 cents a share. For the full year HP said it expects to report earnings of US$1.43 a share.

“HP delivered a solid quarter,” said Carly Fiorina, HP chairman and chief executive officer. “In a seasonally weak period we demonstrated HP’s earnings potential with our most balanced profit performance since the merger.

“In Personal Systems we grew revenue in both desktops and notebooks almost twice as fast as our nearest competitor for the second quarter in a row, achieved the No. 1 market share position worldwide and generated record profits.

“Our Enterprise Systems performance was fuelled by strong revenue growth in our key hardware businesses. We also improved profitability by US$190m from last year while continuing to strengthen our software portfolio with strategic investments and acquisitions.

“Imaging and Printing reported record first quarter revenue and operating profit, reflecting steady growth in our supplies business and good holiday sales in the consumer market. We shipped over 14m hardware units in the quarter, an increase of 12pc over the prior year, and we continued to outpace the market and gain share in key categories, with particular strength in higher value categories.

“HP Services grew 6pc year-over-year despite intensifying pricing pressure in customer support and weakness in the consulting and integration industry. Meanwhile, momentum in managed services continued, with year-over-year growth of 27pc. We expect our operating margin performance to improve throughout the year as we continue to reduce our cost structure.

“Our competitive position is strong in each of our core markets: consumer, small and medium business and enterprise. We have good momentum across our businesses, a compelling portfolio and confidence in our ability to increase growth, profitability and shareowner value,” said Fiorina.

During the first quarter, revenue in the Americas grew 3pc year-over-year to US$8.4bn, and represented 43pc of total revenue. Europe grew 17pc year-over-year to US$8.3bn, and represented 42pc of total revenue. Asia Pacific grew 9pc to US$2.1bn, and represented 11pc of total revenue. Japan grew 4pc year-over-year to US$777m, and represented 4pc of total revenue.

By John Kennedy