Computer giant Hewlett-Packard beat analysts' expectations with its latest results, fuelled by strong improvement in personal and business computer units.
In its third quarter results posted yesterday, the company's total revenue rose from $18.9 billion to $20.8 billion.
Fiscal third-quarter net income fell to $73 million, or 3 cents per share, from $586 million, or 19 cents per share, in the year-ago quarter. Net income was hit by tax payments for repatriating $14.5 billion in foreign earnings, causing it to fall by 88 per cent, but profit margins improved at the company.
However, excluding $988 million in after-tax adjustments primarily relating to the repatriation, HP posted a profit of 36 cents per share, up from a year-ago profit before items of 24 cents per share.
Analysts, on average, had expected a profit of 31 cents per share on revenue of $20.5 billion.
Operating profits rose strongly in the personal computer unit, increasing to $163 million from $23 million, while the business-computer unit returned to profit of $150 million from a year-ago loss of $211 million. However, printing and services profits fell to $771 million from $836 million, and profit at the services group was also hit, decreasing to $256 million from $314 million. The company's operating profit margin, excluding one-time items, widened to 5.7 per cent from 4.5 per cent last year. HP's PC business had an operating profit margin of 2.6 per cent, the best performance since its $19 billion takeover of Compaq in May 2002, Hurd said.
HP is currently in the midst of a cost-cutting scheme, restructuring under new its chief executive Mark Hurd. It hopes to shed 14,500 jobs, which represents about 10 per cent of its work force, in a bid to cut annual costs by $1.9 billion.
Hurd said he viewed the PC market as "steady" and "stable," allaying some of the concerns about a slowing PC market. He also confirmed that HP plans to use some of the repatriated cash to make acquisitions and repurchase its own stock.
HP also issued a profit forecast for the current quarter that was ahead of average Wall Street expectations. For the current, fourth, quarter, HP said it expects earnings per share, before items, of 44 cents to 47 cents on revenue of between $22.4 billion and $22.8 billion. On that basis, analysts expect HP to earn 43 cents per share, on average, within a range of 39 cents to 47 cents, on revenue of $22.7 billion.