Earnings at HP exceed estimates

Profits at Hewlett-Packard tumbled after the computer maker took a $1.1bn charge in the fourth quarter, but earnings excluding the charge topped Wall Street estimates.

HP’s guidance for the coming quarter and for the full year also beat estimates, sending shares in the second-biggest US computer maker up more than 5 per cent in after-hours trading. The shares had gained 2.6 per cent to $29 ahead of the announcement.

The results on Thursday were a further sign of HP’s improving fortunes relative to its rivals. Dell, the world’s biggest computer maker by shipments, has been battered this year by pricing mistakes and sluggish revenue growth. Lexmark, the printer company, last month lowered its earnings forecast because of weak demand.

“We are pleased with our progress to date, but there is more work ahead of us,” said Mark Hurd, HP’s president and chief executive.

HP reported net profits of $416m for the fourth quarter, or 14 cents a share, down 62 per cent from $1.1b, or 37 cents a share, last year. Excluding a $1.1bn charge related to restructuring and amortisation costs, the company earned $1.7bn, or 51 cents a share, beating an average Wall Street estimate of 46 cents a share.

Revenues were $22.9bn, again ahead of estimates and a 7 per cent improvement year-on-year. Operating margins excluding charges rose to 7.6 per cent, from 7 per cent a year earlier.

Mr Hurd, whose low-key management style has won plaudits on Wall Street, unveiled a $1.9bn restructuring plan just months after he took over as chief executive from Carly Fiorina in March.

So far the plan has led to 15,300 job cuts, more than the 14,500 originally expected. Most of the cuts, which account for more than 10 per cent of HP’s workforce, came in the company’s finance, IT and human resources divisions. HP said yesterday the additional redundancies would not affect previous job cut announcements in Europe, which have raised hackles in France.

Over the past 8 months, HP’s share price has risen more than 45 per cent. The stock is among the best performers on the Dow industrials this year.

Mr Hurd has also moved to reorganise the sales force and boost employee morale. HP said yesterday it would pay employees a bonus – their first in several years.

HP said it expected earnings of between 46 cents and 48 cents a share in the fiscal first quarter, excluding special charges. Full-year earnings before exceptionals were expected to be between $1.88 and $1.95 a share. Those estimates exclude the expensing of stock options and other charges.