Hewlett-Packard Co, the second-biggest computer maker, said fiscal first-quarter profit rose 23 percent. Sales increased from the fourth quarter as consumers bought more personal computers and printers.
Profit from operations rose to US$478 million, or US$0.25 a share, from US$390 million, or US$0.20, a year earlier. Sales in the period ended Jan. 31 fell 8.2 percent from a year ago to US$11.4 billion. That compares with fourth-quarter sales of US$10.9 billion.
Earnings excluding some costs beat analysts' targets as consumers snapped up more expensive printers and PCs, boosting profit and trimming losses in unprofitable businesses. Chief Executive Carly Fiorina said the pickup in sales bolsters her case for acquiring smaller rival Compaq Computer Corp for US$22.7 billion, over criticism from dissident director Walter Hewlett.
"There's definite improvement in the consumer side of the business," Christian Koch, whose Trusco Capital Management manages US$50 billion and sold its Hewlett-Packard stake last year, said of the results.
Second-quarter sales will fall "modestly" from the first quarter, with expenses little changed, the company said. Analysts expected sales of US$11.4 billion in the current quarter, the average estimate in a Thomson Financial/First Call survey.
Hewlett-Packard said profit excluding some acquisition costs in the recent period would have been US$0.29 a share. On that basis, analysts expected the company to earn US$0.25 on sales of US$11.2 billion, the average of First Call forecasts. Last week, Fiorina said earnings and sales exceeded forecasts as consumer demand rose. Before the company's preliminary report, analysts on average expected profit of US$0.16 a share.
It's been tough going for 47-year-old Chief Executive Carly Fiorina. Missed sales targets. A failed attempt to buy Pricewater-houseCoopers's consulting business. Even after she fired 5,700 workers to cut costs, Fiorina was criticized for not being sensitive to the company's culture of compassion.
Still, Fiorina has her defenders. "She had to come in and introduce huge changes to a company that has been very resistant to change, and there is no way that could happen without bloodshed," said Nathan Meyers, who worked as a software engineer there for 20 years.
But other former employees say she doesn't understand the values set by the company's founders. "An acquisition like [the proposed purchase of Compaq] would never appeal to Packard and Hewlett because they felt we ought to be doing things ourselves," said David Kirby, who worked at the company for 27 years.
Fiorina's true test will be whether the Compaq deal can succeed. "She's juggling a lot of different things fairly well," said David Katz, chief investment officer at Matrix Asset Advisors. "Whether Carly Fiorina can run that combined company is still a question that needs to be answered."
Net income in the recent quarter was US$484 million, or US$0.25 a share, including a gain for the early payment of debt. In the year-earlier period, including a gain for retiring debt and an adjustment for a change in rules about recognizing revenue, net income was US$141 million, or US$0.07 a share, the company said.
Camera, printer sales higher
Earnings from operations for the quarter climbed 11 percent in the printing unit, and jumped 31 percent in the services division. At the same time, the loss in the PC division narrowed to US$4 million from US$66 million a year earlier.
Sales in the group that makes printers, digital cameras and supplies rose 2 percent from the period ended in October, while the PC segment climbed 22 percent and services gained 1 percent.
Sales of digital cameras and photo printers rose 30 percent from the October quarter, and consumer PC revenue climbed 53 percent, the computer maker said.
Fiorina reiterated that she doesn't expect the economy to recover before the second half of this year, and that corporate spending remains weak, especially in the telecommunications and airline industries.
"Market conditions remain tough worldwide," Fiorina said on a conference call. "While the holiday spending season was a pleasant surprise, we're not counting on it repeating in this post-holiday quarter."
The results prove that Hewlett-Packard employees have focused on sales, even as the company faces a "distracting" proxy fight against Walter Hewlett, Fiorina said. Buying Compaq will help bolster Hewlett-Packard where it is weaker, in servers and computer services, she said. "H-P needs to take decisive action," she said.
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