Hewlett-Packard Co said fiscal second-quarter earnings rose fivefold as sales slipped. The world's second-biggest computer maker said it doesn't expect a "meaningful" improvement in demand until next year.
Net income surged to US$252 million, or US$0.13 a share, from US$47 million, or US$0.02, a year earlier, the company said. Sales in the period ended April 30 dropped 9 percent to US$10.6 billion, missing analyst estimates and sending the shares down 4.6 percent.
Chief Executive Carly Fiorina closed the purchase of Compaq Computer Corp on May 3, and this earnings report is the company's last without Compaq. Hewlett-Packard had US$140 million in acquisition costs, including US$75 million for advertising and proxy solicitation. While consumer sales have held steady during the US recession, Hewlett-Packard executives said they haven't seen a pickup in demand from business clients.
"There's absolutely no recovery" among corporate customers, Chief Financial Officer Bob Wayman said in an interview. Spending by consumers showed "some softening as the quarter went on."
Fiorina said a "muted" recovery is possible in the second half, and she isn't counting on a "meaningful" improvement until next year. A "muted" rebound would be growth of about 2 percent, she said on a conference call.
"The pot at the end of the rainbow would be the elusive corporate upgrade cycle," Bruce Garelick, an analyst at Loomis Sayles & Co, said before the report. "There aren't really many signs of that happening yet."
Hewlett-Packard said profit excluding certain costs in the recent period would have been US$0.25 a share. On that basis, which doesn't conform to generally accepted accounting principles, profit matched the average target in a Thomson First Call survey.
The costs totaled US$260 million. Besides the US$140 million for the acquisition, they included US$59 million related to the acquisition of Indigo NV and US$53 million for declines in the value of assets.
Sales missed the US$11.1 billion First Call estimate. The Palo Alto, California-based company was able to increase profit from a year ago because it cut 6,000 jobs, Wayman said. Expenses were reduced 7 percent from a year ago.
"It's a matter of a management getting on top of the downturn that started about 18 months ago," Wayman said. "We feel very good about the outcome."
The printer unit accounted for 46 percent of sales in the recent quarter and was the most profitable division. Operating profit in that group -- which sells printers, ink and digital cameras -- more than doubled to US$768 million, the company said.
Hewlett-Packard sold more photo printers and low-end LaserJet machines, as well as all-in-one devices that print, scan and fax documents. The company, the world's biggest printer maker, said sales of printer supplies climbed.
Both the PC and server computer units had operating losses. Rival Dell Computer Corp has been gaining sales in both those markets, investors said.
"Where they have a franchise, they did very well and where they compete with Dell, they're doing less well," said Henry Asher, president of Northstar Group Inc, which owns the stock and manages US$140 million.
The results were affected in April by Walter Hewlett's lawsuit and the naming of 400 senior managers, who are learning about their new jobs, Fiorina said. Hewlett, who'd been a company director for 15 years, was removed from the board after he started a proxy fight and filed a lawsuit trying to halt the Compaq deal.
"People's heads in the last month of the quarter were focused on a couple places at once," she said.
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