Computer and printer maker Hewlett-Packard said Wednesday its quarterly results beat Wall Street's expectations as both businesses and consumers got back into IT spending during the holiday period.
HP's fiscal first-quarter net income for the three months ending Jan. 30 rose 25% to $2.3 billion, or 96 cents per share, compared with $1.9 billion, or 75 cents per share a year ago.
Results included a charge of 14 cents per share for special items. Without the charge, HP (HPQ, Fortune 500) said it earned $1.10 per share. Analysts polled by Thomson Financial, who typically exclude one-time items from their estimates, were looking for $1.06 per share.
Sales rose 8% to $31.2 billion from $28.8 billion last year and beat analysts' forecast of $30.01 billion.
"The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook," Mark Hurd, HP chairman and chief executive officer said in a statement.
The company expects earnings per share after adjustments between $4.37 and $4.44 from its previous estimate of $4.25 to $4.35. 2010 revenue is now forecast between $121.5 billion and $122.5 billion, from its previous outlook of $118.0 billion to $119.0 billion.
Analysts are looking for 2010 earnings per share of $4.37 on sales of $120 billion.
HP's strong results mark a recovery in IT spending, primarily driven by demand for hardware like printers, computers and servers, said Shaw Wu, an analyst with Kaufman Brothers.
HP executives would not declare a total recovery in IT spending during their conference call with analyst Wednesday, but Wu said their actions may speak louder than their "cautiously optimistic" words.
"It's a strong outlook," he said. "It shows that they are confident that the recovery that we saw over the last two quarters is continuing into the new year."
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Segment by segment
Consumer and commercial spending on computers and printers, which accounts for about half HP's sales, perked up in the holiday months of 2009. A 20% year-over-year sales jump in HP's personal systems unit and a 4% rise in revenue from the company's printing unit helped drive the quarter's results.
Lagging behind hardware sales, HP's performance in its technology services unit was lackluster. Services, which account for about a quarter of sales, decreased 1% to $8.7 billion.
"We're starting to see more activity in the software and services space so we're continuing momentum we saw in Q4, but it does come a bit later in the cycle than the hardware upticks," CFO Cathie Lesjak said in the conference call.
With HP's acquisition of EDS in 2008, the company bulked up its servers business to compete with IBM. Sales in HP's storage and servers division rose 11% in the first fiscal quarter of 2010, compared to last year.
Hurd said he expects strong growth in HP's server market share later in the year, as trends point to stronger demand for lower-priced servers.
In November, HP announced plans to buy 3Com (COMS), a maker of networking gear. The $2.7 billion deal, which HP expects to close in its second quarter, was approved by the European Commission on Friday. Hurd said customers have been writing in, asking for proof of concepts related to the acquisition.
"We are enamored with the technology," he said.
HP's main rival in the personal computer market, Dell (DELL, Fortune 500), reports its quarterly earnings Thursday.
