HP Posts Higher Profit on Weak Sales
Wed Feb 26, 2:11 PM ET Add Business - NewsFactor to My Yahoo!
Keith Regan, www.EcommerceTimes.com
Hewlett-Packard (NYSE: HPQ - news) posted a profit gain of nearly 50 percent in the first quarter, but sales fell short of expectations, raising concerns about the personal computer and enterprise equipment markets for the rest of the year and sending a ripple through the stock market.
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HP said sales were up 57 percent over the year-ago quarter to US$17.9 billion, but down from the third quarter, which was the first reporting period since HP closed its $19 billion acquisition of Compaq in May 2002. Net income in the first quarter rose to $721 million from $484 million.
Outlook Uncertain
Putting a bright face on the results, HP CEO Carly Fiorina said HP's profit performance came despite "weak commercial spending" on information technology.
"It's difficult to declare a trend in IT spending for 2003," Fiorina said in a conference call, noting that published predictions range from a 5 percent drop in spending to a 6 percent increase. "Predictions are difficult. We are staying focused on what we can control and remain focused on improving profitability and executing in the marketplace."
HP confirmed analysts' income expectations for the second quarter but did not issue sales guidance. "The IT environment continues to be iffy," HP CFO Bob Wayman said.
Cutting Corners
HP's improved bottom-line performance stems largely from cost-cutting in the wake of the Compaq merger. The company already has slashed some 12,000 jobs worldwide and has announced plans to cut up to 5,000 more as it continues to integrate the two companies' operations.
But Aberdeen Group analyst Peter Kastner told the E-Commerce Times that HP can continue paring costs for only a finite period of time before it must boost profits by growing its business again. "People are ready to see what happens next, whether [HP] can turn the next corner," he said.
"If the overall market isn't growing, then it's incumbent upon companies to find ways to grow market share," Kastner added. "But everyone has that same goal."
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