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The World's Biggest Computer Company Bigger Still
HP's Sales Were Up 11% In Its Second Quarter, Its Margin Expanded and It Delivered Its Best Cash Flow Performance
By: Maureen O'Gara
May. 23, 2008 12:30 PM
HP, the largest computer company in the world, is pretty pleased with itself. Sales were up 11% in its second quarter, its margin expanded and it delivered its best cash flow performance in the company’s history, $4.8 billion. Yes, there are spots where it can do better – like in x86 servers. Murk Hurd will always say that. But all in all, he’s pretty happy. You can hear it in his voice.
Tuesday HP laid out its full complement of numbers after rushing out the high points last week when it announced its controversial decision to buy EDS for $13.9 billion cash to make itself more like IBM, a move a lot of people think is dodgy and could slow HP’s revenue growth.
Because of those doubts Hurd repeated again what he said last week about EDS “significantly” extending HP’s reach into enterprise accounts and his oath to get the costs out. “Make no mistake about it,” he said. “We will get the cost right. We will create value for shareholders.”
Unfortunately he wasn’t more detailed. The stock is still down because of the deal and dropped as he spoke.
Anyway, like HP said last week it made $2.6 billion, or 80 cents (GAAP), up from 65 cents, on $28.3 billion with an operating margin of 9.2%, up from 8.3%.
Luckily HP is getting 70% of its business from outside the
When prodded by a question about the economic environment,
Hurd described the
Revenues from EMEA and
Despite gains by Apple and Dell, HP’s PC business grew faster than the market, Hurd said, with revenues up 16% to $10.1 billion on units up 21%.
Notebook revenues retained their commanding lead, up 31% while desktop revenue was flat. Commercial PC revenue was up 17%, consumer up 16%.
The unit’s operating profit was up 30% to $544 million, or 5.4% of revenue, from $417 million, or 4.8% of revenue last year.
Earnings from printers were flat at $1.2 billion on sales up 6% to $7.6 billion with supplies up 8%, commercial hardware up 6% and consumer hardware down 3%.
HP’s industry standard server business was flat against a tough compare but Hurd said the company “missed a couple of deals that we would have liked to have had” and had execution issues – though not as many as in Q1 when it left money on the table. He also said HP “picked spots,” without explaining what he meant.
Overall storage and servers kicked in $4.8 billion in revenues, up 4% on the back of blades, up a hefty 68%, and storage, up 14%, which Hurd thinks could have been more. HP’s high-end XP storage line was up 21%, and its midrange EVA line up 17%. Its earnings contribution was $655 million, or 13.7% of revenue, up from $452 million, or 9.8% of revenue last year.
Software was up 28% to $727 million in revenue, earning $93 million up from $7 million, the huge difference attributable to HP’s acquisitions.
HP reiterated what it said last week about its outlook for
the current quarter, projecting revenues of $27.3 billion to $27.4 billion and
earnings of 76 cents-77 cents a share (GAAP) or 82 cents-83 cents (non-GAAP).
CFO Cathie Lesjak said component prices this quarter aren’t as favorable as
they’ve been in the last few quarters.
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