August 19, 2008 11:15 pm

Laptop sales boost HP profits

Strong laptop sales helped push Hewlett-Packard to a better-than-expected performance in the third quarter in spite of a tougher economic environment.

Shares of HP increased 2.5 per cent to $44.81 after the company reported sales and profits that beat Wall Street forecasts.

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The jump in HP’s stock price came in spite of a forecast calling for slower sales growth in the current quarter amid an economic slowdown and the strengthening of the dollar, which could blunt HP’s sales advantage in overseas markets.

HP said its net profit grew 14 per cent in the third quarter to $2.03bn, up from $1.78bn last year.

“It was a good quarter for us,” said Mark Hurd, chief executive. “We really felt good about it and felt like we had balanced growth.”

Mr Hurd said the company had continued to cut costs during the quarter, continuing a pattern that began when he replaced Carly Fiorina as HP’s CEO in 2005.

Sales were $28bn, up 10 per cent from the period a year before.

The performance was boosted by currency effects. Stripping out currency movements, sales rose 5 per cent.

Overseas sales accounted for 68 per cent of HP’s revenue in the period, down 2 per cent from the previous quarter.

HP trimmed its sales guidance for the current quarter to $30.2bn-$30.3bn, from $32.25bn, reversing a two-year trend of boosting sales forecasts.

Its forecast did not include any likely impacts from HP’s pending acquisition of Electronic Data Systems, the IT services group.

In May, HP announced a $13.9bn deal to buy EDS, a move that will further challenge IBM’s dominance of one of the technology industry’s most lucrative markets.

The acquisition, which is expected to close by the end of the month, would be HP’s biggest since its $19bn acquisition of Compaq, a rival PC maker, in 2002.

HP said it had based its revised sales forecast on the dollar exchange rate at the beginning of August, before its recent sharp rise against the euro, sterling and other currencies.

“If the dollar stays at current levels, we may experience some downward pressure on revenue,” Cathie Lesjak, HP’s chief financial officer, said.

Of HP’s four main business units, its imaging and printing group struggled the most to raise its sales in the period.

Revenues in the printing business, which accounts for a large part of HP’s profits, grew 3 per cent in the quarter, with printer shipments down 2 per cent in the period.

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